BANK of England governor Andrew Bailey said on Friday (Aug 23) he thought inflation pressure in Britain’s economy was becoming less stubborn than in recent years, but it was still too soon to be sure.
“We are now seeing a revision down in our assessment of that intrinsic persistence, but this is not something we can take for granted,” Bailey said in a speech text released by the central bank, ahead of its delivery at a central banking conference organised by the Federal Reserve in Jackson Hole, Wyoming.
On Aug 1 the BOE cut its main interest rate to 5 per cent after keeping it at a 16-year high of 5.25 per cent for nearly a year.
Bailey said then that the BOE would “be careful not to cut interest rates too quickly or by too much”.
In the text of Friday’s speech, Bailey said recent signals from the economy meant he was “cautiously optimistic that inflation expectations are better anchored”.
“The second-round inflation effects appear to be smaller than we expected. But it is too early to declare victory.”
Bailey said it remained to be seen whether inflation pressures would ease off to a level consistent with the BOE’s 2 per cent inflation target on a sustained basis “and what it will take to make that happen”.
Investors were pricing a roughly one in three chance of the BOE cutting interest rates by a further quarter-point at its September meeting.
Earlier on Friday at the Jackson Hole event, Federal Reserve chair Jerome Powell said the time had come for the US central bank to cut borrowing costs. REUTERS
