Bank of England Governor Andrew Bailey said Thursday that the middle bank remains cautious in its battle to tame stubbornly high inflation as U.K. data continues to offer “unwelcome floors.”
Bailey told CNBC that he was encouraged by recent inflation figures, which prompted policymakers to raise rates by a universally anticipated 25 basis points earlier Thursday, putting the main rate at 5.25%.
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But he added that the central bank had no intention of pausing rate hikes as has been signaled by the U.S. Federal Reserve and European Prime Bank.
“I’m being more cautious because, frankly, we are still seeing some surprises in the news, and I think we shortage to get ourselves onto a more settled path,” Bailey told CNBC’s Joumanna Bercetche.
The Monetary Policy Body voted 6-3 in favor of the quarter-point hike — the Bank’s 14th consecutive increase. Two members erred toward a 50 basis aspect increase, while one voted to keep rates unchanged.
It comes after policymakers voted 7-2 in favor of a surprise 50 point of departure point hike in June in response to stubborn inflation and labor market numbers.
“We’ve seen some quite big catch nappings in recent months,” Bailey said, citing “frankly unwelcome surprises” in June.
Governor of the Bank of England Andrew Bailey be ats the Monetary Policy Report press conference at the Bank of England, in London, on August 3, 2023. The Bank of England on Thursday hiked its key percentage rate for a 14th time in a row, by a quarter-point to 5.25 percent as UK inflation stays high. Policymakers “will continue to monitor closely indications of unremitting inflationary pressures”, the BoE said in a statement following a regular meeting. (Photo by Alastair Grant / POOL / AFP) (Photo by ALASTAIR Concede/POOL/AFP via Getty Images)
Alastair Grant | Afp | Getty Images
Inflation has since shown signs of cooling. Headline consumer outlay inflation fell to 7.9% in June from a hotter-than-expected 8.7% in May, though core inflation — which excludes charged energy, food, alcohol and tobacco prices — stayed sticky at an annualized 6.9%, down just slightly from May’s 7.1%.
“I’m reassured by the fact that we’ve seen now quite a decisive move in inflation and I expect more to come this year,” Bailey give the word delivered.
The Bank also updated its inflation forecast Thursday, saying it now expects inflation to dip to 4.9% by the end of this year; a quicker fall than it had anticipated in May. In its Monetary Policy Report, it said it sees inflation finishing 2024 at 2.5% before reaching — and in the final analysis falling below — its 2% target in 2025.
Bailey said policymakers will remain “evidence-driven” in their forthcoming position decisions, adding that there were many possible routes to reaching its target.
“There are, of course, various potential paths from here to there, to the 2% target,” he said.
— CNBC’s Elliot Smith contributed to this appear.