Bank of England's Ramsden more confident UK inflation risks are ebbing

WASHINGTON (Reuters) -Bank of England Deputy Governor Dave Ramsden said on Friday that the risk of British inflation getting stuck too high had receded and it might prove weaker than the BoE's most recent forecasts.

Ramsden, who has voted recently to keep interest rates at their highest since 2008, said inflation could remain around the BoE's 2% target for the next three years - rather than rise higher later this year as the central bank forecast in February.

"Over the last few months I have become more confident in the evidence that risks to persistence in domestic inflation pressures are receding, helped by improved inflation dynamics," Ramsden said.

Earlier this week, BoE Governor Andrew Bailey said inflation in Britain was slowing largely as expected by the central bank.

Figures on Wednesday showed Britain's annual consumer price inflation fell to 3.2% in March from 3.4% in February, dropping further from a peak of 11.1% in October 2022 but a slightly smaller decrease than expected by investors.

The BoE has said it expects inflation to undershoot its 2% target in the current quarter, thanks in large part to weaker energy prices, before rising closer to 3% by the end of this year.

But Ramsden - in comments prepared for a conference organised by the Peterson Institute for International Economics - said he thought that forecast might prove too strong.

"For me the balance of domestic risks to the outlook for UK inflation, relative to the February... forecasts, is now tilted to the downside, with a scenario where inflation stays close to the 2% target over the whole forecast period at least as likely," Ramsden said.

Britain's still strong pace of inflation in the services sector, which at 6.0% in March remained an outlier, was likely to converge with services inflation in the United States and the euro zone, Ramsden said.

But unlike in the United States, the backdrop to inflation in Britain was of continuing weak economic growth, he said.

Comments this week by U.S. Federal Reserve Chair Jerome Powell that the U.S. needed more time for higher interest rates to bring down inflation prompted investors to scale back bets on rate cuts by other central banks. That included the BoE, which is now expected to cut borrowing costs twice at most before the end of the year.

"I will continue to take a watchful and responsive approach to my policy decisions as I have tried to do throughout this period of unprecedented structural shocks," Ramsden said.

(Reporting by William Schomberg and David Milliken in London; editing by Jonathan Oatis)