BoE's Breeden backs interest rate cuts, says hard to know how quickly

(Reuters) -Bank of England Deputy Governor Sarah Breeden said on Thursday that recent evidence supported the case to cut interest rates gradually but that it was tricky to gauge the right speed of easing.

"The recent evidence further supports the case to withdraw policy restrictiveness and I expect to continue to remove restrictiveness gradually over time," Breeden said in a speech at the University of Edinburgh.

Breeden, deputy governor for financial stability and viewed as a centrist on the Monetary Policy Committee, said it was "difficult to know" at this stage how quickly interest rates should fall.

"To be clear, I expect Bank Rate to come down over time as the effects of the large shocks of the past continue to abate," Breeden said.

She said an upside scenario for British inflation that she outlined a year ago, when she said it was her biggest concern, was no longer a "core consideration" in setting policy.

There was tentative evidence that the economy had started to weaken, Breeden said, although she added that she was also watching to see how employers responded to the government's Oct. 30 budget announcement of tax hikes.

The BoE lowered interest rates to 4.75% from 5% in November but raised its inflation forecasts due partly to the budget measures, which it said would also boost growth in the short run.

The central bank has said repeatedly that it will move gradually with further rate cuts.

Financial markets are pricing in two quarter-point rate cuts this year, while economists polled by Reuters last month on average expected four.

Breeden said the BoE was monitoring Britain's government bond market after the yield on 30-year gilts climbed to a 26-year high in a selloff on Tuesday and Wednesday linked in part to the imminent return to the White House of Donald Trump.

"So far the moves have been orderly. We do need to watch this space. So far, so good," Breeden said, adding that the fall in gilt prices, which has pushed up yields, was linked to global factors.

(Reporting by Andy Bruce and William Schomberg; writing by Suban Abdulla; editing by David Milliken and Hugh Lawson)