Bank of England Governor Andrew Bailey suggested UK interest rates may not have to rise any further, saying a “marked” drop in inflation is likely this year and that monetary policy is probably “near the top of the cycle.”
“Many of the indicators are now moving as we would expect them to move,” Bailey said at the hearing in Parliament on Wednesday. “Indicators are signaling the fall in inflation will continue.”The pound fell to a three month low. It dropped as much as 0.7% to trade below $1.25 for the first time since June after Bailey’s comments and also strong US economic data. Gilts rallied even as US and German equivalents fell, with the yield on two-year UK bonds down five basis points to 5.23%.
The dispute prompted Alison Rose to step down as chief executive officer of NatWest Group Plc, which owns Coutts, after it emerged that she discussed Farage’s account with a journalist. Bailey reiterated that the Financial Conduct Authority was looking into the issue.Cunliffe said lenders are tightening credit conditions and company indebtedness is climbing after the surge in interest rates.
“We’ve definitely got a substantial amount of transmission to come,” he said. “It appears that there is a longer transmission, that the lags are longer. We have to factor that in our policy decision.”Cunliffe said the latest economic indicators are providing “mixed signals” about the UK, with pay growth strong but some cooling in the labor market.
Bailey said whether inflation expectations follow the recent moderation in price growth will be key to its upcoming policy decisions ahead of its next meeting on September 21. In her annual report to the Treasury select committee, Dhingra said: “Policy is already sufficiently restrictive, and the lagged effects of further tightening pose serious risks of output volatility in order to make a small dent on inflation.”
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