Battered but unbowed: Andrew Bailey’s turbulent six years running the Bank of England

For Andrew Bailey, it seems luck has been in short supply. Both his predecessors faced major crises, but it seems as though the problems have come thick and fast for the current governor.

His term of office began just as the world shut down for Covid, with central banks forced to scramble to develop a coherent response to an almost unthinkable scenario.

Since then, the global economy has run from one crisis to another, giving little time for reflection. By comparison, Mark Carney’s period of ultra-low interest rates and anaemic inflation seem like halcyon years. His finest moment came in September 2022, during the market turmoil triggered by the UK’s infamous “mini-Budget”.

As gilt yields surged and pension funds faced a liquidity crunch, the Bank stepped in with emergency bond purchases to stabilise markets. The intervention - a temporary programme to buy long-dated government bonds - calmed a spiralling situation and prevented what could have become a full-blown financial crisis.

That episode cemented Bailey’s reputation as a crisis manager. At a moment when confidence in UK financial markets was evaporating, the Bank acted decisively and restored stability.

But if Bailey’s tenure has been strong on crisis containment, it has been less convincing when it comes to economic dynamism.

Inflation provides the most contentious example. Consumer price growth surged after the pandemic, peaking above 11% in 2022 - the highest level in four decades. While the Bank of England was not alone in being caught out by the speed of the surge, critics argue it moved too cautiously in tightening policy.

To its credit, the Bank ultimately embarked on a sustained rate-hiking cycle that did bring inflation down from its peak. But the journey was slow and painful, particularly for households facing soaring mortgage costs and businesses grappling with higher borrowing.

This pattern - deliberate, gradual action - became something of a defining trait of Bailey’s governorship.

From the perspective of markets and investors, the consequences were tangible. Higher borrowing costs weighed heavily on the parts of the UK equity market most sensitive to domestic growth. Housebuilders, retailers and smaller companies struggled under the pressure of tighter financial conditions, while the broader UK stock market continued to battle for global investor attention.

In fairness, central banks do not control economic growth directly. Their mandate is price stability, not market performance. But the tone set by monetary policy can shape the investment climate, and Bailey’s cautious approach often coincided with an economy that felt stuck in second gear.

Even now, that balancing act continues. The Bank had begun easing policy as inflation cooled, but the process now remains cautious as policymakers weigh lingering risks from wages, energy prices and global tensions.

That leaves Bailey with a legacy that is likely to divide opinion.

Supporters will argue that he steered the UK through an extraordinary period of turbulence, keeping the financial system intact during shocks that might have destabilised weaker institutions.

Critics, however, will say something else: that while Bailey kept the engine from stalling, he never quite managed to accelerate the UK economy.

Six years on, Andrew Bailey looks less like a governor who transformed Britain’s economic fortunes and more like one who ensured the machinery kept running. In calmer times that might seem unremarkable. Given the storms he faced, it may ultimately prove to be his most important achievement.

With two years left in his term, the question now is whether he can shift the narrative - though the current volatility in global politics is unlikely to make that task any easier.

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Chris Beauchamp is Chief Market Analyst at IG

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