Andrew Bailey said he is increasingly confident that inflation is heading towards the Bank’s target
Bank of England boss Andrew Bailey has suggested that interest rates might be cut this year as inflation shows signs that it is heading towards the Bank’s target.
Mr Bailey thinks that because the risk of wages and prices going up together is less now, interest rate cuts are now a probability. He also said that last year’s technical recession was small. Mr Bailey said: “It’s like the Sherlock Holmes dog that doesn’t bark.”
“If the second-round effects don’t come through that’s good because monetary policy has done its job. We have an increasingly positive story to tell on that. The global shocks are unwinding and we are not seeing a lot of sticky persistence (in inflation) coming through at the moment.”
He explained that future meetings of the Bank’s Monetary Police Committee might consider lowering rates. With people thinking that interest rates might be cut soon, the FTSE 100 almost reached a record high on Friday.
During the day, the list of the UK’s biggest companies reached 7,960 points but didn’t quite make it past 8,000. Kathleen Brooks, who is in charge of research at trading platform XTB, said: “The market rally this week was driven by news that central banks have shifted to a more dovish stance.”
“At the Bank of England, Catherine Mann and Jonathan Haskel, the two remaining hawks at the Bank who had been voting for more rate hikes, changed their tune and opted for rates to remain on hold this month. The dovish shift in the Bank vote split is seen as a major step towards cutting rates later this year. The market now thinks that the first rate cut will come in June, and that there will be three rate cuts this year.”
