BOE Deputy Governor: "Government Austerity Plan Has No Impact on Monetary Policy... Austerity Must Continue"

Dave Ramsden, Deputy Governor of the Bank of England (BOE)
Photo by Reuters Yonhap News

[Asia Economy Reporter Park Byung-hee] Dave Ramsden, Deputy Governor of the Bank of England (BOE), stated that the government's ?55 billion (approximately 88 trillion KRW) austerity plan would have little impact on monetary policy. Although the government has introduced measures for fiscal stability, Ramsden argued that this does not provide a reason for the BOE to slow down the pace of interest rate hikes.

According to major foreign media on the 24th (local time), at the King's College London conference, Deputy Governor Ramsden said that the effects of the government's austerity plan would appear too late and would not influence the BOE's monetary policy in the coming months.

Ramsden said, "Most of the effects of the fiscal plan announced by Chancellor Jeremy Hunt will only appear after April 2025," adding, "Therefore, it has almost no impact on the three-year economic forecasts mentioned in the BOE's November monetary policy report."

On the 17th, Chancellor Hunt announced a five-year medium-term fiscal plan to secure ?55 billion (88 trillion KRW) through tax increases and government spending cuts. At that time, Hunt said that thanks to the government's fiscal plan, interest rates could be significantly lowered.

However, Deputy Governor Ramsden stated that since it will take time for the effects of the government's fiscal plan to materialize, there is no reason for the BOE to adjust the pace of tightening.

Foreign media analyzed that Ramsden's remarks appeared to undermine Chancellor Hunt's expectations.

Ramsden said, "I believe the BOE needs to raise the base interest rate further to bring inflation back to the monetary policy target level." He added, "If companies continue to raise product prices to prevent profit margin declines due to rising raw material costs, and wage growth significantly exceeds the BOE's monetary policy target of 2%, a substantial interest rate hike will be considered at the December monetary policy meeting."

The BOE has decided to raise the base interest rate in all eight recent monetary policy meetings from December last year to the 3rd of this month. During this period, the UK's base interest rate rose from 0.1% to 3%.

However, inflation has not subsided.

The UK's consumer price inflation rate for October (year-on-year) was 11.1%, the highest in 41 years. Recently, in the UK, there have been a series of worker protests demanding wage increases, citing difficulties in maintaining their livelihoods.

This content was produced with the assistance of AI translation services.