MNI BRIEF: BOE Taylor Sees Bank Rate Falling To 2.75%

Bank of England Monetary Policy Committee member Alan Taylor explained Friday why the market curve is too high with the equilibrium rate, or R star, well below where the market sees the policy rate settling.

Once all the economic shocks have evaporated "I would expect Bank Rate to normalise at close to the central estimate of 2.75%" for the neutral rate, whereas the market curve has rates ending up between 3.5 and 4%, Taylor told an event at the LSE. With the policy rate currently at 4.25% there is still a long way to go while the rate before the rate is no longer restrictive.

"For me a better risk management approach at this point is to cut and hold for longer later, rather than hold too much, and have to cut in a hurry later," Taylor, who voted in the minority for a cut in June, said.