Bank of England Governor Andrew Bailey has dismissed expectations that the central bank is ready to pause or pivot on rate hikes.
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London – The bank of england spoke on Thursday on expectations that it is prepared to pause or reverse rate hikes, noting that it still has some way to go in its efforts to reduce inflation.
Governor Andrew Bailey told CNBC that the omission of the word “coercion” from its forward guidance at Thursday’s Monetary Policy Committee meeting was not a sign “we’re done” despite seeing an encouraging decline in price increases.
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“I’m not saying this is it, we’re doing, because the world is very uncertain at the moment,” he said CNBC’s Joumanna Beretse,
bank on thursday voted 7-2 in favor of one Rate hiked by half a point for the second time in a rowRaising the key bank rate to a 14-year high of 4%.
At the same time, it also revised its economic forecast for the year, predicting a shorter and shallower recession than previously predicted.
Actual fell against the dollar and gold water Yields fell in afternoon trade on speculation that the bank could be nearing the end of its hiking cycle.
‘An encouraging downside’
Bailey said there were “many reasons” to be more optimistic in its growth forecast, including falling energy prices, a flattening market curve for interest rates and a comfortable unemployment forecast. However, he cautioned the markets against becoming complacent.
“There is an encouraging downward trajectory of inflation in our central projection, but there is a substantial downside risk,” he said. “We’ve got the biggest risk in our forecast on inflation that we’ve ever had before.”
UK inflation eases to 10.5% in December, down slightly from November’s 10.7%. However, the International Monetary Fund on Monday slashed its forecast for Britain’s GDP growth in 2023 to -0.6%, making it the world’s worst-performing major economy, behind even Russia.
The UK’s central bank, for its part, expects the economy to shrink 0.5% this year, and an upward revision to the 1.5% contraction projected in December. It then sees the economy shrink by 0.25% in 2024, compared to a 0.9% uptick forecast by the IMF.
The Bank of England’s rate hike follows similar moves by other major central banks this week as policymakers continue their efforts to tame still-high inflation.
European Central Bank voted first Thursday 50 basis points increase in rates and the US Federal Reserve moved on Wednesday 25 basis points increase in rates,
However, Bailey stressed that the bank’s policy decisions would not be influenced by the policy decisions of other central banks.
“We central banks don’t coordinate monetary policy in that sense because we are each setting monetary policy for our own particular setting,” he said. “We have to set interest rates for the UK”