BoE’s Bailey says it’s ‘too early’ to talk about cuts

Governor of the Bank of England Andrew Bailey has pushed back against cutting interest rates in the near future. Photo: Henry Nicholls/Pool via Reuters
(POOL New / reuters)

Governor of the Bank of England (BoE) Andrew Bailey has pushed against interest rate cuts, reiterating that the fight against inflation is far from over.

Bailey stated that he is “optimistic” about inflation returning to the 2% target within two years, but that it will likely require higher rates for a longer period of time to achieve that.

Speaking at a conference in Dublin, Bailey emphasized, “Policy is going have to be restrictive for an extended period to see the second half out, which is where policy is going to have to do the work to bring inflation back to target, and I believe it’s going to happen.”

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“Our forecast suggests we will be back at the target in around the two-year horizon.

“I’m optimistic. I think it will happen but I’m afraid we’ve got to continue doing the work to make it happen,” he added.

Last week, the BoE left rates on hold for the second time in a row at 5.25%, the highest level in 15 years.

“It’s really too early to be talking about cutting rates. The market of course will reach a view it has to reach. So I totally understand that. But we are very clear we aren’t we’re not talking about that,” Bailey said at the conference hosted by the Central Bank of Ireland.

However, this clashes with remarks made by BoE chief economist Huw Pill, who suggested on Monday that the central bank was prepared to cut interest rates by the middle of next year.

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An interest rate cut in August 2024 “doesn’t seem totally unreasonable, at least to me,” he said.

Up until September, the BoE had raised rates 14 times in a row to tame soaring inflation, which has been squeezing household budgets.

Watch: BoE freezes rate, rules out cuts any time soon

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