Bank governor signals further rate hikes if inflation ‘persistent’

17 May 2023, 12:24

Andrew Bailey
Andrew Bailey. Picture: PA

Earlier this month, the Bank increased rates for a 12th consecutive meeting to 4.5%.

The governor of the Bank of England has warned the central bank will continue to increase interest rates if there are signs that inflation is remaining persistent.

However, Andrew Bailey also revealed that pressure from Britain’s tight labour market has loosened.

It came as the governor spoke to business leaders at the British Chambers of Commerce annual conference in London.

Earlier this month, the Bank increased interest rates for a 12th consecutive meeting to 4.5% – the highest rate since 2008 – in an effort to bring down rampant inflation.

The most recent inflation reading was reported at 10.1% for March, ahead of market forecasts.

The governor blamed higher food prices and the tight labour market for continued inflationary pressure as he committed to tighten monetary policy further if cost increases stay ahead of target.

“I can assure you that the Monetary Policy Committee will adjust bank rate as necessary to return inflation to target sustainably in the medium term, in line with its remit,” Mr Bailey said.

“If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.

ECONOMY Unemployment
(PA Graphics)

“Our commitment to the 2% inflation target is unwavering.”

Nevertheless, Mr Bailey said there are “good reasons” to expect inflation to “fall sharply over the coming months” as energy prices slide back from peak levels.

The speech came a day after the Office for National Statistics revealed the unemployment rate surprisingly increased to 3.9% over the first three months of the year.

Meanwhile, employment levels rose as more men returned to the labour market.

The governor said: “There are signs that the labour market is loosening a little.”

However, he added: “The easing of labour market tightness is happening at a slower pace than we expected in February, and the labour market remains very tight.”

By Press Association