Finance
Bank of England faces risk of "deficient demand," Taylor says
Published by Global Banking & Finance Review®
Posted on March 2, 2026
2 min readLast updated: March 2, 2026
Quick Summary
Bank of England policymaker Alan Taylor warned that the Bank may soon exit the trade‑off between slowing growth and inflation, and risk descending into “deficient demand,” as inflation, employment, and wage growth disappoint forecasts.
Bank of England at Risk of Deficient Demand, Warns Policymaker Alan Taylor
Policymaker Alan Taylor Highlights Economic Risks
Trade-Off Between Economy and Inflation
OSLO, March 2(Reuters) - The Bank of England will soon find itself in a position where it will no longer face much of a trade-off between a slowing economy and inflationary pressures and there is a risk that demands falls too low, policymaker Alan Taylor said on Monday.
Comments from Alan Taylor at Oslo Conference
"I judge that we will soon find ourselves largely outside of trade-off territory – and even at risk of entering the familiar realm of deficient demand," Taylor said at a conference hosted by Norway's central bank in Oslo.
Factors Contributing to Deficient Demand
That was because "over 2025, and into 2026, broadly speaking, inflation has been weaker than expected in successive (BoE) forecasts, the unemployment rate higher, and wage growth lower," he said.
Monetary Policy Committee Decisions
Taylor was part of a four-strong minority on the BoE's Monetary Policy Committee which sought to cut benchmark interest rates to 3.5% from 3.75% last month. He said at the time he saw a risk that inflation could persistently undershoot the BoE's 2% target in the future.
Reporting and Editing Credits
(Reporting by Yoruk Bahceli in LondonEditing by William Schomberg)
Key Takeaways
- •Taylor cautioned that inflation has been weaker than expected, unemployment higher, and wage growth lower over 2025‑2026, increasing the risk of deficient demand and undershooting the 2 % inflation target. (ft.com)
- •He was part of a minority of the MPC advocating a cut from 3.75 % to 3.5 %, warning that inflation could persistently undershoot the target if rates remain too restrictive. (investing.com)
- •Recent data underscores his concerns: unemployment has risen to multi‑year highs and private‑sector wage growth continues to slow, reinforcing market bets on imminent rate cuts. (ainvest.com)
References
Frequently Asked Questions about Bank of England faces risk of "deficient demand," Taylor says
1What risk did Alan Taylor highlight regarding the UK economy?
Alan Taylor warned that the Bank of England risks facing 'deficient demand' as inflation stays weak and demand may fall too low.
2Why does the Bank of England face less of a trade-off between inflation and the economy?
Taylor stated that inflation has been weaker than expected, unemployment higher, and wage growth lower, reducing the trade-off.
3What interest rate cut did Taylor and others propose recently?
Taylor was among those proposing a cut of the benchmark interest rate to 3.5% from 3.75%.
4What concern does Taylor have about future inflation?
Taylor is concerned that inflation could persistently undershoot the Bank of England's 2% target in the future.
