Bank of England’s Andrew Bailey says limiting inflation will be ‘hard work’

Bank of England Governor Andrew Bailey underlined the challenging task of achieving the central bank's 2 per cent inflation target, attributing much of the recent decline to the normalisation of energy costs. In an interview with ChronicleLive on Monday, Bailey acknowledged the necessity of policy and monetary measures to address the inflationary challenge.

Highlighting the current restrictive nature of policy, Bailey expressed caution about potential economic repercussions. Despite the Bank of England maintaining interest rates for the second consecutive meeting this month, after 14 successive increases, Bailey underscored the ongoing difficulty in steering inflation down and minimising further economic damage.

The inflation rate, which peaked above 11 per cent a year ago, retreated to 4.6 per cent in October. The Bank of England's latest forecasts indicate a return to the 2 per cent inflation target only by the end of 2025. Bailey acknowledged the strain on households due to elevated interest rates impacting mortgages and rents, emphasising his awareness of the challenges faced by the less well-off.

While recognising the impact on households, Bailey reiterated that it is premature for the Bank of England to contemplate interest rate cuts. Despite concerns for the less affluent, he pushed back against assumptions of near-future rate cuts, emphasizing the need to first achieve the 2 per cent inflation target.

Financial markets currently anticipate a potential rate cut by the Bank of England in September next year, reflecting the uncertainty surrounding the economic landscape and the complex task of balancing inflationary pressures with broader economic considerations.

(With Reuters inputs)