Clare Lombardelli: What if things are different?

Speech by Ms Clare Lombardelli, Deputy Governor for Monetary Policy of the Bank of England, at the Bank of England Watchers Conference, London, 12 May 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good morning. Thank you for inviting me. It's a pleasure to speak again at the Bank of England Watchers Conference.

Today I'm going to talk about two things: the outlook for inflation and reforms to our monetary policy processes.

My messages are: first, if you consider all the economic news, noise and bumpiness, underlying inflation pressures for the UK economy have continued to fall. So, it is sensible for us to continue our gradual and careful approach to reducing policy restrictiveness, including through another cut in Bank Rate by 25bps last Thursday.

And second, in reforming our monetary policy processes, we are putting risks and uncertainty more explicitly at the centre of our policy framework. This means important roles for scenarios and wider risk considerations alongside the central outlook. We are developing a wider framework and suite of analytical inputs to build uncertainties and risks into our policy deliberations when appropriate. In that context, I will talk this morning about how we used scenarios in our most recent policy round.

The outlook for inflation

When I spoke at the Watchers conference in November I talked about the disinflation process, the underlying drivers of inflationary pressure, the need to see further progress on that and the expectation that we would. That has broadly played out, allowing restriction to be reduced gradually. Monetary policy is still restrictive and the current stance reflects a balance between the need to continue to squeeze out underlying inflationary pressure and managing the risks of lower demand in the economy. It is preferable to conduct monetary policy in a steady and predictable way, contributing stability to the environment for other economic decision makers. And we have been able to do that over the last year or so.