The Hawk’s Warning: Why Clare Lombardelli Voted to Keep Your Mortgage Rates High

It is rare for a Chief Economist to vote against their own Governor, but Clare Lombardelli did just that. She led the rebellion of the “hawks,” voting to keep rates on hold rather than cut them to 3.75%. Her reasoning is simple but stark: the war on inflation is not over, and declaring victory now is dangerous.
Lombardelli is fixated on “elevated wage growth.” With pay rising at 3.5%, she believes that inflation is baked into the system. She argues that if you cut rates while wages are rising that fast, you just encourage companies to keep raising prices. You create a spiral that destroys the value of money.
Her vote is a warning to the public: do not get too comfortable. She believes that the pain of high rates is necessary to break the psychology of inflation. By cutting too early, she fears the Bank will have to inflict even more pain later to fix the mistake.
This “medicine must taste bad to work” philosophy is unpopular but historically grounded. Premature cuts in the 1970s led to a decade of misery. Lombardelli is trying to prevent history from repeating itself.
Her dissent ensures that the Bank remains vigilant. Even though she lost the vote, her arguments haunt the decision. If inflation ticks up in January, Lombardelli will be the one saying, “I told you so.”