Bank of England officials support their first statement after a 50 basis point rate cut: Gradual actions will weigh down the economy.

Swati Dhingra, a policy maker at the Bank of England, detailed her call for a rate cut, stating that taking a "gradual" approach would still weigh on the economy this year. This is the first public comment she and her colleague Catherine Mann have made since voting in favor of a 50 basis point cut on February 6. She said that consumer spending may remain weak, and inflation pressures would also be subdued. Dhingra and Mann's vote in favor of a significant rate cut did not pass, as the committee ultimately supported a 25 basis point cut to 4.5%. Bank of England Governor Andrew Bailey said officials are taking a "gradual and cautious" approach to further easing policy. The money market is pricing in two more rate cuts this year. Dhingra said on Monday at the University of London, "So, even if you think of a gradual definition in terms of 25 basis points every quarter, by most metrics, we would still be in a restrictive territory for the full year. I worry about upcoming inflation increases, largely because it happens to be on some quite significant items." However, she added, "Consumption remains quite weak, so we haven't seen inflation pressures pick up again." Just hours before making these comments, Dhingra had just been appointed as the second member for a three-year term on the Monetary Policy Committee. Dhingra has consistently held a dovish stance on the committee. However, Mann's call for a 50 basis point rate cut came as a surprise, as she has been one of the most hawkish members. Bank of England policymakers are facing a challenging outlook, with the economy stagnating and inflation resurging against the backdrop of rising energy prices. In January, it reached a higher-than-expected 3%, with the Bank of England projecting it to reach 3.7% in the third quarter almost twice the 2% target. The Bank expects no second-round effects on wages and prices but does not rule out the possibility. Dhingra remains optimistic. She said, on inflation data, "It looks like there's more inflation in the system than you see when you look at the headline numbers." Excluding housing, prices for services producers are showing "quite a bit of disinflation." Dhingra said there is clear evidence that the labor market is cooling down. She said bankruptcy numbers "are starting to show that the pain is being felt more by small businesses than the average." Vacancies in the retail and hospitality sectors could decrease as job vacancies in these sectors are below pre-pandemic levels. While wages have increased, consumer spending has not, meaning that "something has changed in this process." Household savings are not being "chased" into goods and services. Dhingra said, "The weakness in consumption is not going away because we basically haven't fully recovered, and that's why I lean towards wanting to reduce the level of constraints we see in the economy. I think there are two things we all pretty much agree on, one being there are quite a lot of constraints in the system, and two, the disinflation process doesn't look like it's derailing."