BoE's Taylor says he "...expect monetary policy to normalise at neutral sooner rather than later, as I said in the December minutes". BoE sees inflation at target in mid-2026, judges this to be sustainable given cooling wage growth
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- "Interest rates should continue on a downward path, that is if my outlook continues to match up with the data, as it has done over the past year."
- On the view that trade diversion could lower UK inflation by 0.2pps in 2026 and 2027, then 0.1pps in 2028, primarily via lower import prices, Taylor says "This is a baseline figure, and arguably quite conservative. My judgement of the volumes and elasticities is a bit higher than this baseline and has been one factor therefore in my judgement throughout 2025 that UK inflation would end up on a lower trace than in our central projection"
- "... seeing signs of substantial trade diversion into the UK and also into the EU, our main trading partner, with the latter more clearly evident from some of the policy response to import surges in some sectors."
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