BoE President: We keep policy interest rates stable in June

Bailey, during a press conference held after the Monetary Policy Committee (MPC) decided to keep the policy interest rate at 5.25%, stated that the impact of “global major shocks” causing inflation to rise has begun to diminish.

Bailey mentioned that annual inflation in the UK is approaching 3%, and they expect it to decrease to the Bank of England’s target of 2% in the coming months. He said, “All these developments are encouraging, but we are not yet at a point where we can lower the bank’s interest rate. We will make decisions based on future economic data. However, I can say that we are experiencing fewer surprises in the data now, which is a sign that we are returning to normal economic periods. Before our meeting in June, we will evaluate inflation twice and labor market data once. Let me be clear, neither ruling out nor planning changes in policy interest rates in June.”

Bailey also mentioned that the pressures leading to high wage increases in the country are beginning to ease.

Stating that they have made quite good progress in reducing inflation to the 2% target, Bailey said:

“We will probably need to cut interest rates and make monetary policy slightly less restrictive in the coming quarters. We may be able to cut interest rates faster than currently priced in the market, but we are completely focused on the data and paying close attention to indicators of the inflation outlook. Even if the data completely aligns with the forecasts, the Bank needs to decide whether the risks to sustainably reducing inflation to the 2% target have diminished. Therefore, every meeting is a new decision for us.”

Bailey expressed that economic and inflation dynamics in the UK are different from those in the US, and there has been some divergence in market expectations recently. He said, “There is no law stating that the Federal Reserve should act first (in interest rate cuts), and then others, including us, should follow.”

BoE President Andrew Bailey emphasized that they have a duty and goals regarding inflation in the UK, stating, “By making a small cut in the policy interest rate, I still believe that monetary policy can remain restrictive.”

source: prepared by Melisa Beğiç

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