BOE governor encouraged by latest UK inflation data

BANK of England (BOE) governor Andrew Bailey said he was encouraged by inflation data published on Wednesday (Feb 14) which left price growth broadly as the central bank expected, and he pointed to early signs of a pick-up in the economy.

Official figures showed consumer prices rose 4 per cent in the 12 months to January – a slightly smaller rise than the BOE had expected in its forecasts published on Feb 1.

“That’s good news, as far as I can tell,” Bailey told the Economic Affairs Committee in the House of Lords, the upper house of Britain’s parliament.

January’s lower-than-expected inflation reading followed a surprise to the upside in December.

“I think it leaves us broadly where we thought we were going to be. But that’s obviously encouraging relative to where we could have been,” Bailey said.

The BOE earlier this month held its benchmark rate at 5.25 per cent, its highest since 2008, but signalled that the time was approaching for a first rate-cut since the coronavirus pandemic as it forecast that inflation would fall to its 2 per cent target soon.

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Bailey said on Wednesday that services inflation was still too high to be consistent with the BOE’s 2 per cent target, and rate-setters needed more clear evidence that wage growth was receding before cutting interest rates.

He also said there were signs that Britain’s economy was gathering momentum even if data due to be published on Thursday might show it was in recession in the second half of last year.

It was “in the balance” whether economic output data due on Thursday shows Britain had two consecutive quarters of economic contraction in the second half of 2023, Bailey said. REUTERS