Opinions on interest rate policy are divided within the Bank of England

The decision makers of the Bank of England are engaged in a heated debate over whether to maintain high interest rates. Megan Greene recently warned that inflation may not automatically subside, so monetary policy needs to maintain sufficient tightening to prevent uncontrolled price increases.

The persistence of inflation will not subside on its own, and monetary policy may need to continue to tighten. "- Megan Greene

On the other hand, Catherine Mann publicly stated earlier this week that she supports faster and greater interest rate cuts. She pointed out that the UK's economic growth is approaching stagnation, and if more aggressive monetary easing policies are not adopted, it may have a greater impact on the job market and consumer confidence.

I have changed my perspective and now I am more concerned about the economic downturn. "- Catherine Mann

This statement marks a clear divergence within the Bank of England on interest rate policy, with one side advocating for continued efforts to combat inflation, while the other believes that the risk of economic recession is more worthy of vigilance.

The UK economy is facing 'dual pressure'

The UK economy is currently facing two major challenges: sustained high inflation and weak growth. Data shows that recruitment activities in the UK private sector are declining at the fastest pace since the 2008 financial crisis. In addition, the significant decline in consumer and business confidence indicates a lack of economic growth momentum.

Although the Bank of England lowered interest rates from 4.75% to 4.5% last week, this adjustment was relatively small and did not significantly boost market confidence. Greene pointed out that high inflation in the UK may exceed the standard for the fifth consecutive year this year, which means that the central bank cannot relax monetary policy too quickly, otherwise it may lead to another rise in prices.

Inflation will exceed the target for the fifth consecutive year this year. "- Megan Greene

In contrast, Mann's viewpoint focuses more on economic growth issues. She believes that the pressure on British businesses and consumers is increasing, and if more aggressive interest rate cuts are not taken, the economy may further deteriorate. She even advocates that interest rates should be lowered earlier and faster than market expectations to reduce the risk of economic downturn.

The Chancellor of the Exchequer is facing enormous market pressure

UK Chancellor of the Exchequer Rachel Reeves is facing high-pressure market challenges. The fiscal monitoring agency recently warned that the UK government's fiscal space has been completely eroded due to weak economic growth and rising borrowing costs. This means that the government's policy choices are shrinking, and market expectations of future interest rate trends have become a key factor affecting fiscal policy.

Reeves currently hopes that the market can trust that the Bank of England will cut interest rates as soon as possible to reduce the government's financing costs. However, if the internal divisions within the central bank continue to widen, it may increase market uncertainty and subsequently affect the government's fiscal strategy.

Editor's viewpoint: The pound may be under pressure in the short term, but its long-term trend still depends on policy direction

The policy divergence of the Bank of England has had a certain impact on the trend of the pound. In the short term, if the market believes that the pace of interest rate cuts by the Bank of England is slow, the pound may receive some support due to expectations of high interest rates. However, if the market starts betting on the increased risk of economic recession, investors may choose to avoid pound assets, putting pressure on the pound.