MNI BRIEF: BOE's Taylor Sees Five Cuts Needed In 2025

Bank of England Monetary Policy Committee member Alan Taylor said that the UK economic outlook has deteriorated and that he thought more policy easing is required than he previously assumed.

Speaking in Sintra said that as the clouds of the shocks of the first quarter cleared "my reading of the deteriorating outlook suggested to me that we needed to be on a lower rate path, needing five cuts in 2025 rather than the market-implied quarterly pace of four."

The assumption of quarterly easing is far from consensus on the MPC, with five members having voted against it at various times. Taylor in his speech made the case for using assumptions about the neutral rate, R-star, as a guide to policy, saying that he estimated the neutral real rate to be about 0.75 -1%, or 2.75-3% in nominal terms, which would indicate further easing next year. (See MNI INTERVIEW: Recent Inflation Shocks Restrict Policy - Monti)