BoE's Taylor: I have become more reassured that we are proceeding towards inflation normalisation at a reasonable pace

BoE's Taylor: I have become more reassured that we are proceeding towards inflation normalisation at a reasonable pace

BoE’s Taylor Expresses Confidence in Inflation Normalization Timeline

Bank of England policymaker Alan Taylor has signaled growing confidence that inflation will return to the central bank’s 2% target “at a reasonable pace,” with expectations of further interest rate reductions as economic conditions align with projections. In a speech delivered at the National University of Singapore, Taylor stated that inflation is now anticipated to reach 2% by mid-2026—earlier than previously projected—due to cooling wage growth and stabilizing price pressures according to Taylor's analysis.

Taylor’s outlook aligns with recent Monetary Policy Committee (MPC) actions, including the December 2025 decision to cut the benchmark interest rate to 3.75% from 4%. While four MPC members voted to maintain rates unchanged, Taylor emphasized that monetary policy normalization is progressing “sooner rather than later,” contingent on continued alignment between his projections and incoming data as reported.

Market expectations reflect this trajectory, with investors pricing in two additional 25-basis-point rate cuts by the BoE in 2026. Taylor also highlighted the potential for global trade recovery to act as a “positive supply shock,” reducing inflationary pressures in the long term, particularly as trade tensions ease according to Taylor's assessment.

However, not all BoE officials share uniform optimism. Catherine Mann, another MPC member, acknowledged recent inflation data as “good numbers” but noted persistent uncertainties in identifying a sustainable underlying inflation trend. She emphasized the need for further improvement in core economic indicators to confirm sustained progress toward the 2% target according to Reuters reporting.

The BoE’s February 2026 Monetary Policy Report, published on February 5, will provide updated inflation projections and guide future rate decisions. With inflation currently at 3.2%, the central bank remains focused on balancing growth and price stability as it navigates the path to normalization as detailed in the report.

Investors and analysts will closely monitor upcoming data releases and MPC statements for clarity on the pace of rate cuts and the timeline for achieving inflationary equilibrium.