MNI POLICY: BOE's New Dove Ramsden Often Leading Indicator

Bank of England Deputy Governor for Markets and Banking Dave Ramsden has shown a knack for anticipating moves by a majority on the Monetary Policy Committee and his tilt towards easing in an April speech could be a harbinger of a cut ahead if other Bank insiders follow his lead.

Ramsden has voted for Bank Rate at 5.25% since August last year but on April 19 he said he was more confident that the risks of persistent domestic inflation pressures were receding. While Huw Pill seemed to push back only days later, saying that there had been little material change in the data and that the first Bank Rate cut "remained some way off", the chief economist has never dissented since joining the MPC in September 2021, instead tending to set out views aligned with the majority. This means that both could stay true to their track records if Ramsden goes early in voting for a cut in May and Pill follows the other insiders and moves into line in the near future.

In November 2021, Ramsden voted for a hike just before the majority followed suit, and in February and September 2022 he voted for a larger hike, with the MPC playing catch up the month after. Unlike the independents on the committee, such as the hawkish Catherine Mann and Jonathan Haskel and Swati Dhingra on the dovish side, Ramsden does not tend to remain isolated for long.

GOVERNOR'S VIEW

The views of Bank Governor Andrew Bailey, and deputy governors Sarah Breeden and Ben Broadbent, would need to move towards Ramsden's, but the Committee dynamics suggest this is plausible. Any shift to a more dovish stance in the May MPC minutes, policy statement and Monetary Policy Report would then likely put a June cut into play.

The dividing lines on the MPC have been more over how to interpret the data, and what weight to place on various measures of inflation persistence, than over likely data outturns in coming months.

The MPC’s February forecast showed inflation dropping to the 2% inflation target this quarter before rebounding to near 3% by the first quarter of 2025. Ramsden cited research by his former colleague Gertjan Vlieghe which suggested that the more elevated services component of the consumer price index is not a good indicator of inflationary persistence as it has been determined in large part by the fading energy price shock. (See MNI INTERVIEW: Services Inflation Poor Policy Guide - Vlieghe)