On November 29, 2024, Bank of England Governor Andrew Bailey was at the central bank headquarters in the City of London, England.
Holly Adams | Bloomberg | Getty Images
Bank of England Governor Andrew Bailey said on Wednesday that Britain could cut interest rates four times next year if inflation continues to fall.
In a video interview with the Financial Times, Bailey was asked whether the central bank was prepared to cut interest rates four times by a quarter of a percentage point over the next year if forecasts of “a little bit (of inflation) persisting” came true. The answer was: “Indeed.”
According to LSEG data, the market currently expects the Bank of England to keep interest rates unchanged at its December meeting, followed by three 25 basis point interest rate cuts. If all four cuts are achieved, the Bank of England’s main interest rate will fall to around 3.75%, having already cut interest rates twice so far this year. The agency began cutting interest rates this summer, with Bailey telling reporters in November that the bank needed to take a “gradual” approach to lowering rates.
“Monetary policy needs to remain restrictive long enough until risks of a sustained return to the 2% target over the medium term have further dissipated,” he said at the time.
Surveying inflation on Wednesday, the Bank of England governor added that consumer prices were falling faster than the central bank had expected.
“A year ago we said inflation today would be about 1% higher than it actually is,” he said in an interview. “I think this is a good test of the (central bank) system.”
Rising UK inflation surprises markets October was significantly higher than expected by 2.3%higher than 1.7% in September.
The pound was slightly lower on Wednesday morning, down 0.06% to around $1.2666 at 11:15am London time. Meanwhile, the UK 10-year government bond yield was flat at around 4.276%.
