2024-11-07 13:06:00
Announcing the November rate decision, the Bank of England governor Andrew Bailey indicated more cuts were to come but said it would be a “gradual fall from here”.
Although the headline CPI figure of 1.7% is below the 2% target, the Bank also considers other measures, externalsuch as “core inflation” when deciding how to change rates.
Core inflation doesn’t include food or energy prices because they tend to be very volatile, so can be a better indication of longer term trends. It was 3.2% in the year to September, down from 3.6%.
In its latest forecast for the global economy, the International Monetary Fund (IMF) warned that persistent inflation in countries including the UK and US might mean interest rates have to stay “higher for even longer”.
In October, Mr Bailey said the Bank of England could be a “bit more aggressive” at cutting borrowing costs, if inflation remained under control.
However, after the Budget at the end of that month, the Bank predicted that its measures – such as an increase in National Insurance Contributions paid by employers – will lift inflation slightly as businesses pass on their increased costs through higher prices.
At November’s rate cut Mr Bailey cautioned: “We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much.”
1731191072
#inflation #rate #quickly #prices #rising
**Interviewer:** Thank you for joining us today. With the recent comments from Bank of England Governor Andrew Bailey regarding interest rates, what’s your perspective on his caution against cutting rates “too quickly”?
**Guest:** Thank you for having me. Andrew Bailey’s statement highlights a critical balance that monetary policy must strike. Rapidly cutting interest rates could spur inflationary pressures again, especially if the economic recovery remains fragile.
**Interviewer:** That’s an interesting point. He mentioned a “gradual fall” in rates. How do you think this approach will impact businesses and consumers in the UK?
**Guest:** A gradual approach can help provide stability in the economy. For businesses, it allows them to plan investments without the unpredictability that can accompany sharp rate cuts. Consumers might benefit from gradual improvements in borrowing costs, but they’ll need to manage their expectations regarding savings rates as well.
**Interviewer:** With the potential for further cuts mentioned, what factors should the Bank of England consider in making its decisions moving forward?
**Guest:** The Bank should consider inflation trends, employment levels, and overall economic growth. They must also acknowledge external factors, like global economic conditions. Any decision to cut rates has to be data-driven to ensure that it supports sustainable economic growth without leading to excessive inflation.
**Interviewer:** Excellent insights! Do you see any risks associated with this cautious approach?
**Guest:** Yes, there are risks. A prolonged period of high interest rates could stymie growth and consumer spending. Conversely, if the Bank waits too long to cut rates, it risks a slowdown in economic recovery. The key is to monitor economic indicators closely and be flexible in their approach.
**Interviewer:** Thank you for your thoughts today. It’s clear that the decisions made by the Bank of England will have far-reaching effects in the coming months.
**Guest:** Absolutely, and I look forward to seeing how these policies unfold. Thank you for having me.
