Published by Global Banking & Finance Review®
Posted on March 26, 2026
2 min readLast updated: March 26, 2026
Add as preferred source on GoogleBoE policymaker Alan Taylor argues that the Monetary Policy Committee should keep interest rates unchanged until the economic fallout from the Iran war becomes clearer, citing uncertainty around energy prices and limited inflation risk due to a weakening labour market.
March 26 (Reuters) - Bank of England policymaker Alan Taylor said on Thursday that he saw a high bar to hiking interest rates and it was preferable to hold borrowing costs until there was greater clarity on the impact of the war in Iran on the economy.
Taylor, who until the start of the conflict was a long-time advocate for lower interest rates, voted this month to leave them on hold, as did all the other eight members of the Monetary Policy Committee, some of whom warned rate hikes could happen.
"Given massive uncertainty around future energy prices, and our starting point, I currently see a high bar to hiking," Taylor said in the text of a speech due to be delivered at a conference in New York hosted by Exante Data.
"Holding policy steady is preferable until the impact becomes clearer."
Despite a recent surge in inflation expectations among consumers and a jump in manufacturers' input costs, Taylor said there was a "low risk" of inflation in Britain becoming unanchored due to the weakening labour market and the smaller scale of the energy shock so far than in 2022.
Earlier on Thursday, BoE Deputy Governor Sarah Breeden said she saw less risk of second-round inflation effects now than from Russia's full-scale invasion of Ukraine in 2022, due to greater labour market weakness.
Taylor said the current shock was more akin to 2011, when the BoE was able to "look through" a shock to energy prices without raising interest rates and damaging the economy.
If a similar scenario played out now, that might allow for interest rate cuts if risks diminish, Taylor said.
But he warned less favourable outcomes were possible.
"If disruptions persist and the shock grows, the MPC will face a tougher choice between high inflation and weaker growth," Taylor said. "The rate path will depend on the trade-off, and on whether risks of de-anchoring come into play."
(Reporting by Andy Bruce and William Schomberg; editing by Catarina Demony)
Taylor believes high uncertainty from the Iran war's economic impact makes it preferable to hold rates until there is greater clarity.
Energy price volatility, inflation expectations, and a weakening UK labour market are major influences on current rate decisions.
Taylor mentioned that, if the energy shock is limited and risks diminish, there is potential for rate cuts.
Taylor noted the current shock is more similar to 2011, when the BoE did not raise rates despite price surges.
Persistent disruptions or a growing shock could force the BoE to choose between controlling inflation and supporting growth.
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