Sarah Breeden says the central bank is in no rush to act, as policymakers weigh the inflationary impact of the Iran conflict
The Bank of England doesn’t need to raise interest rates at either of its next two scheduled meetings, its deputy governor has said, signalling that policymakers intend to take more time to assess the economic fallout from the Middle East conflict before moving on borrowing costs.
Sarah Breeden told the Financial Times on Thursday that while a rate increase could not be delayed indefinitely, there was no urgency to act in June or July. "You're obviously correct that we can't wait forever, but we don't need to do it in June or July," she said.
The Bank's next decision is due on June 18, with a further meeting scheduled for July 30. At its April meeting, the MPC left rates on hold for the third consecutive time, with policymakers split on the likely direction of borrowing costs as they gauge the inflationary consequences of the Iran war.
CPI inflation stood at 3.3% in March, above the Bank's 2% target, and the MPC projected it would rise to 3.1% in the second quarter and 3.3% in the third, with a further increase anticipated in the fourth quarter due to higher energy and food prices.
Watching and waiting
Breeden told the FT the institution was "in a good place to be able to watch what's happening in the economy," adding: "We don't need to rush to act."
She also played down the risk of the Iran conflict producing the kind of prolonged inflationary spiral seen after Russia's invasion of Ukraine in 2022, saying it was far less likely that the Middle East hostilities would generate second-round effects on a comparable scale.
Markets currently price in two to three rate increases from the Bank of England this year, with the first widely anticipated over the summer. Breeden's comments suggest that timeline may be pushed back, though she did not close the door on eventual action.
Stablecoin rules under review
Separately, Breeden indicated that the Bank is rethinking elements of its proposed framework for regulating stablecoins — digital assets designed to maintain a stable value, typically pegged to a currency such as sterling and backed by conventional assets including government debt.
Industry groups have pushed back against two specific proposals: a requirement that stablecoin issuers hold 40% of backing assets as unremunerated deposits at the central bank, and caps limiting individual holdings to £20,000 and business holdings to £10m. Critics argued the measures would be operationally unworkable.
Breeden acknowledged the concerns. "What we have heard from industry is that the way we have proposed to implement limits is cumbersome operationally for a temporary measure," she told the FT. "So we are genuinely open to thinking whether there are other ways of achieving our objective."
She added that the Bank was "looking very hard" at alternatives to the current proposals, though she did not specify what form those might take or when revised rules might be published.
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