BOE Governor Bailey: No Rush for Further Rate Cuts

Remarks of Officials

Central Bank

Summary:

BOE Governor Bailey said at the Jackson Hole Economic Symposium on August 23 that he thought long-term inflation pressures were easing but further interest rate cuts would not be rushed.

On August 23, Bank of England (BOE) Governor Andrew Bailey delivered a speech at the Jackson Hole Economic Symposium, with the main content as follows:

The persistent element of inflation remains, but it is smaller in magnitude now than we expected a year ago. We still face the question of whether this persistent element is on course to decline to a level consistent with inflation being at target on a sustained basis and what it will take to make that happen. Is the decline of persistence now almost baked in as the shocks to headline inflation unwind, or will it also require a negative output gap to open up, or are we experiencing a more permanent change to price, wage and margin setting which would require monetary policy to remain tighter for longer? This framework is now prominent in our thinking on the MPC.

It appears to me that the economic costs of bringing down persistent inflation – costs in terms of lower output and higher unemployment – could be less than in the past. This is consistent with a process of disinflation which is steady and more in keeping with a soft landing than a recession induced process.

Inflation expectations appear to be better anchored, leading me to be cautiously optimistic that inflation will return to target levels. While we are seeing a lower level of inflation persistence than we expected a year ago, we need to be cautious because the job is not completed. Policy setting will need to remain restrictive for sufficiently long until the risks to inflation remaining sustainably around the 2% target in the medium term have dissipated further. The course will therefore be a steady one.

Speech by BOE Governor Bailey

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BOE Governor Bailey: No Rush for Further Rate Cuts

Speech by BOE Governor Bailey

Risk Disclosure