It is "possible" that the base rate could be cut over the summer, the deputy governor at the Bank of England (BoE), Ben Broadbent, has said.

In his final speech as a member of the Monetary Policy Committee (MPC), Broadbent stated that the effect on inflation and the war in Ukraine "have now faded".

He went on to point towards "second-round effects" of the earlier surge on domestic inflation as the reason for bank rates remaining at the highest they’ve been for 16 years.

However, Broadbent said that if inflation continues to drop in line with forecasts and the MPC learns from the data, he expects the base rate to be cut some time in the next few months.

The BoE announced earlier this month that the base rate will remain at 5.25% for the sixth consecutive period. Inflation has dropped from a peak of 11.1% in October 2022 to 3.2% in March 2024, with the central bank still targeting an inflation rate of 2% and keeping the base rate at this level in order to continue combating levels of of high inflation.

In the latest meeting of the MPC, seven members of the nine-member board voted to keep the base rate at 5.25%, while two individuals voted to lower it by 0.25% in order to become "less restrictive".

Broadbent, who will stand down from the role in July, was one of the seven MPC members who voted to maintain the base rate for another period.

In his final speech, he said: "The direct effect on inflation of the pandemic and the war have now faded. Having accounted for the significant majority of the rise in inflation in 2021 and 2022, the passthrough of the ups and downs in tradeable prices have since accounted for most of its decline as well. What we’re now left with are the more persistent, second-round effects of that earlier surge on domestic inflation.

"How long these persist is unclear. If the process were entirely symmetric then you might expect these effects to unwind relatively quickly, within the next year or so.

"In view of the rarity of events like this over the past, and the associated uncertainty about the future, that’s entirely understandable. Whatever the priors of its individual members the MPC will continue to learn from the incoming data and, if things continue to evolve with its forecasts – forecasts that suggest policy will have to become less restrictive at some point – then it’s possible bank rate could be cut some time over the summer."

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