Bank of England governor Andrew Bailey has urged markets not to expect any early cuts in interest rates, insisting it is “far too early” to loosen monetary policy.
The Bank still had “a long way to go” to get inflation back to the 2% target, he told a gathering hosted by the National Farmers Union.
His comments shore up views expressed last week by two members of the bank’s ratesetting monetary policy committee. Megan Greene said the MPC was not considering interest rate cuts, while Dave Ramsden said borrowing costs would have to stay high for an “extended period”.
Mr Bailey’s intervention comes as markets and politicians begin to talk up the prospects for rate cuts with some even predicting the firstr move as early as February.
The stated position of the MPC and the US Federal Reserve is that borrowing costs must stay higher for longer if inflation is to be conquered.
“The MPC’s latest projections indicate that monetary policy is likely to need to be restrictive for quite some time yet,” said Mr Bailey.
UK interest rates have risen from 0.1% in November 2021 to a 15-year high of 5.25% and inflation has fallen to a two-year low of 4.6% but the MPC does not expect to hit its 2% target until 2025.