Further BOE rate increase avoidable, Bailey says

Bank of England Governor Andrew Bailey said on Wednesday that it was possible the central bank had already come to the end of its rate-rising cycle, although it was too soon to be sure about the future path of policy.

The BOE raised interest rates to 4 per cent last month but signalled it was close to ending a run of increases which began in December 2021, as some of the inflation pressures in Britain’s economy showed signs of easing.

“At this stage, I would caution against suggesting either that we are done with increasing Bank Rate, or that we will inevitably need to do more,” Bailey said in the text of a speech at an event organised by public relations firm Brunswick Group, which was closed to media.

“Some further increase in Bank Rate may turn out to be appropriate, but nothing is decided,” Bailey added.

Following Bailey’s remarks, financial markets slightly trimmed bets on the likelihood of a quarter-point rate rise on March 23 after the BoE’s next meeting, but still see rates rising to a peak of 4.75 per cent in the second half of this year.

Bailey said that the economy had developed largely as expected since the BOE raised rates on Feb. 2.

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“Inflation has been slightly weaker, and activity and wages slightly stronger, though I would emphasise ‘slightly’ in both cases,” he said.

One member of the BoE’s Monetary Policy Committee, Catherine Mann, said last week that it was too soon to say that the risks posed by last year’s surge in inflation had eased and that the central bank should continue to raise borrowing costs.

But two MPC members,Swati Dhingra and Silvana Tenreyro, voted in February to pause the rate hikes. REUTERS