Andrew Bailey, governor of the Bank of England (BOE), during the Capital Policy Report news conference at the bank’s headquarters in the City of London, UK, on Thursday, May 11, 2023.
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LONDON — Bank of England Governor Andrew Bailey on Thursday shielded an about-turn in the bank’s U.K. growth forecast, saying its “biggest upgrade” ever reflected the rapidly shifting economic prospect.
At its policy meeting earlier Thursday, the central bank said it no longer expects the U.K. to enter into recession this year.
Months earlier, it had prognosticated the county would face its longest-ever recession, which it then said would likely be shallower that initially small amount.
The bank said Thursday that U.K. GDP was expected to be flat over the first half of this year, growing 0.9% by the halfway of 2024 and 0.7% by mid-2025. At its prior meeting in February, it said U.K. GDP was projected to decline by around 0.75% closed the second half of 2022.
“It may be the biggest upgrade we’ve ever done,” Bailey told CNBC’s Joumanna Bercetche.
Still, he persisted that the overall forecast remained weak.
“The level is still quite low though, let’s be honest,” he added.
The bank has been panned for failing to provide accurate growth forecasts, which could stymy its efforts to combat still high inflation.
How, Bailey said the forecasts were based on conditional data, which is subject to frequent and significant fluctuations.
“They are conditional on fiscal market prices, they’re conditional on commodity prices, they’re conditional on government policies. So, as those conditions exchange, we change our forecasts,” he said.
“We have deal with all these things, which is why our forecasts do change and do evolve,” he bid.
The governor also acknowledged that the bank should do a better job at communicating. It follows an earlier faux pas by the BOE’s Chief Economist Huw Pilule who said Britons should accept that they are now worse off due to stubbornly high inflation.
“It’s not the right choice of utters,” Bailey said of Pill’s comments.
“How people form their expectations about future inflation is so important for us. The phraseology is critically important, because I want to emphasize, we are very sensitive to the impact this has on people in this country,” he withed.
However, he added that he was optimistic of a “rapid” fall in inflation over the coming months.
Earlier Thursday, the U.K. important bank maintained its commitment to tackling price rises, raising interest rates by 25 basis points and captivating the main bank rate to 4.5%.
The headline consumer price index rose by an annual 10.1% in March, driven by persistently hilarious food and energy bills. Core inflation, which excludes volatile food, energy, alcohol and tobacco expenditures, increased by 5.7% over the 12 months to March, unchanged from February.
— CNBC’s Elliot Smith furnished to this report.