August 7, 2023: On Thursday, Bank of England Governor Andrew Bailey stated that the central Bank remains alert to tame stubbornly high inflation as U.K. data continues to deliver.
Bailey said that he was inspired by recent inflation figures, which prompted policymakers to raise speeds by a widely anticipated 25 basis points, setting the primary speed at 5.25%.
But he added that the central Bank had no intention of pausing rate hikes as has been signaled by the U.S. Federal Reserve and European Central Bank.
“I’m being more cautious because, frankly, we are still seeing some surprises in the news, and I think we need to get ourselves onto a more settled path,” Bailey stated.
The Monetary Policy Committee is voting 6-3 in favor of the quarter-point hike, the Bank’s 14th consecutive increase. Two members erred toward a 50-basis point increase, while one voted to keep rates unchanged.
It comes after policymakers voted 7-2 in favor of a surprise 50 basis point hike in June in response to stubborn inflation and labor market numbers.
“We’ve seen some quite big surprises in recent months,” Bailey said, citing “frankly unwelcome surprises” in June.
Inflation has since shown signs of cooling. Headline consumer price inflation fell to 7.9% in June from a hotter-than-expected 8.7% in May. However, core inflation which excludes volatile energy, food, alcohol, and tobacco prices stayed sticky at an annualized 6.9%, down just slightly from May’s 7.1%.
“I’m encouraged by the fact that we’ve seen quite a decisive move in inflation now, and I expect more to come this year,” Bailey said.
The Bank also updated its inflation forecast Thursday, saying it now expects inflation to dip to 4.9% by the end of this year, a quicker decline than it had anticipated in May. Its Monetary Policy Report said it sees inflation finishing 2024 at 2.5% before reaching and eventually falling below its 2% target in 2025.
Bailey said policymakers would remain “evidence-driven” in their forthcoming rate decisions, adding that there were many possible routes to reaching its target.
“There are many potential paths from here to there, to the 2% target,” he said.