Lisbon: The Bank of England (BoE) Governor Andrew Bailey stated that the policy rate is trending downwards, although it remains restrictive for the time being. Bailey’s remarks came during his participation at a European Central Bank forum in Portugal.
According to Anadolu Agency, Bailey highlighted signs of a softening economy and similar indicators in the labor market. He mentioned the necessity for these signals to impact prices meaningfully. The recent inflation rise in the UK, he noted, was predominantly in ‘administered prices’ and did not reflect the overall economic state.
Bailey expressed caution regarding expectations for how low the policy rate could be reduced during this cycle. He emphasized the uncertainty surrounding interest rates and the focus on assessing the restrictiveness of current and future monetary policy. The BoE staff is actively evaluating the policy’s restrictiveness, he added.
Despite the anticipated downward trend, Bailey expects monetary policy to eventually approach a ‘neutral’ level, yet all evaluations must consider the present context. His comments followed the BoE’s decision to maintain the policy rate at 4.25% during its June meeting, following four rate cuts since last August when the bank began reducing borrowing costs. The current bank rate is at its lowest since February 2023, when it was 4%.