Ramsden Warns of Potential Rate Hikes Amid Inflation Pressures

Bank of England Deputy Governor Dave Ramsden spoke at London's Money Macro and Finance Society on Monday, commenting for the first time since the central bank announced its plan to sell down its £488 billion ($647 billion) gilt holdings by 2034. The BoE will sell gilts at a pace of £20 billion per year, allowing shorter-dated debt to mature while keeping £120 billion of long-dated gilts to back banknote issuance.

Ramsden stated that markets appeared to have reacted well to the announcement, with gilt prices rallying sharply after the BoE's decision. This suggests the market was expecting more quantitative tightening (QT), either in total or at a higher pace, and the removal of uncertainty about the path of future QT reduced risk premia.

Regarding interest rates, Ramsden repeated his view from minutes of September's policy decision that the BoE may need to raise Bank Rate if inflation pressures build. He noted that while the current policy stance continues to provide restrictiveness, there could be a case for increasing Bank Rate if upside pressures on the inflation outlook continue to grow.