LONDON, Feb 5 (Reuters) – The Bank of England left interest rates on hold at 3.75% in a surprisingly close 5-4 split vote, with Governor Andrew Bailey and external policymaker Catherine Mann saying they could join those pushing to cut borrowing costs at some point.
Below are key comments from the press conference on Thursday.
BAILEY ON FUTURE DIRECTION OF RATES:
“Based on the current evidence, bank rate is likely to be reduced further, but judgements around further policy easing will become a closer call.”
“On the one hand, cutting of the bank rate too quickly or by too much could lead to inflation pressures persisting, requiring policy to change course. On the other hand, waiting too long to ease policy could come at the cost of a sharper downturn in activity and subsequently inflation, requiring greater policy easing.”
“If the economy and the outlook for inflation evolve as we expect, there should be some scope for further easing in monetary policy in the period ahead, but for every cut in bank rate, how much further to go becomes a closer call.”
“I think the curve is in a fairly reasonable place, certainly fits with my thinking in this decision, but it doesn’t condition in any precise sense, either the timing or the scale of any future moves, because that will depend on how the evidence emerges.”
“Today, we are moving into a more settled world where the sort of thinking that you were, you were outlining about, you know, where might the sort of the neutral rate be, becomes much more relevant. So I’m not going to endorse 3.25% but I think, you know, there is a reasonable sort of market curve at the moment, but we’ll see where it ends up.”
BAILEY ON INFLATION:
“Our first key policy judgment (is), that the risk from greater inflation persistence has continued to become less pronounced.”
“While wage growth may only be falling slowly, new bank staff analysis provides reassurance that structural changes in wage setting will not keep adding to inflationary pressures.”
“We need to see more evidence, in my view, that we’re going to get this sustainable return to target. And that really is an issue about what I call underlying inflation.”
“Now, I would expect, based on, you know, patterns of history, that, as we start to see and it comes through the data, this, this pattern of inflation coming off…that will feed through into expectations, because that’s the way it normally works, and that is something that will certainly, certainly give me greater confidence that we’re on track.”
BAILEY ON POLITICAL UNCERTAINTY IN THE UK LINKED TO PM KEIR STARMER AND HIS APPOINTMENT OF PETER MANDELSON AS U.S. ENVOY:
“All market conditions this morning have been entirely orderly.”
“I think whatever happens in politics, I am not going to comment on that for obvious reasons, what is much more important here is what goes on in the underlying economy.”
“I can assure you that we don’t spend our time discussing political risk, actually. That’s not a factor that we discuss. And let me reiterate something we’ve said many times: we obviously take financial market prices as a conditioning assumption, so to the extent it’s in there, it’s in there, it’s not something we explicitly discuss.”
ON U.S. PRESIDENT DONALD TRUMP’S CHOICE OF KEVIN WARSH TO HEAD UP THE U.S. CENTRAL BANK FROM MAY:
“I welcome the nomination of Kevin Warsh…this is not a Jay (Powell) versus Kevin thing …I know both of them very well. They’re both very qualified.”
ON HOW AI IS AFFECTING JOBS:
“I think we are seeing evidence probably of reduced hiring in some activities…some of that is, it’s probably due to sort of broader economic conditions, but some of it maybe beginning to be reflective of AI.”
(Reporting by UK bureau)
Comments