Bank of England Governor Andrew Bailey highlighted the formidable challenge of achieving the 2% inflation target, attributing much of the recent decrease to the conclusion of the prior year's surge in energy prices.
In an interview with the ChronicleLive website, Bailey stressed that achieving the remaining inflation must involve a combination of political measures and monetary policy. He emphasized that the existing policies are exerting a restrictive impact on the economy. Bailey acknowledged the strenuous effort required to restore inflation to 2% and stressed that it is critical to avoid further economic harm.
Maintaining rates unchanged for the second consecutive month following 14 consecutive hikes, the Bank of England aims to curb inflation that peaked at over 11% just over a year ago, settling at 4.6% in October.
As per the Bank of England's latest projections, inflation is not anticipated to rebound to 2% until the end of 2025. Bailey acknowledged the impact of elevated interest rates on households grappling with escalating mortgages and rents. Despite this, he is cautioned that it is still early to contemplate interest rate reductions.
While recognizing the challenges faced by economically disadvantaged groups, Bailey underscored the importance of restoring inflation to the 2% target.
Dismissing speculations of an upcoming interest rate cut, he stated that discussions on such matters are premature. Currently, financial markets are anticipating the first rate cut by the Bank of England in September of the following year.
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