February 24, 2024
Bank governor says it’s ‘too early’ to declare victory on inflation

The Governor of the Bank of England has warned it is “too early” to say inflation has been brought under control, even as last week’s data showed the Prime Minister’s target of halving inflation has been met.

Andrew Bailey, who sits on the body that sets interest rates, said inflation was still “very high”.

Last week’s inflation data showed that the price of a basket of goods and services rose by about 4.6% in the 12 months to the end of October.

This reading, called consumer price index (CPI) inflation, was the lowest in two years.

After the figures came out, Prime Minister Rishi Sunak said he had halved inflation, one of five key priorities set at the beginning of the year. Economists already expected inflation to more than halve when Mr Sunak made the pledge.

While Mr Sunak wanted to halve inflation from around 11% earlier this year, the actual target the bank is working towards is 2%.

In a speech, Mr Bailey said it was too early to say that inflation has been brought under control and it was also too early to talk about cutting interest rates.

The bank has raised rates over the past two years in an effort to get inflation under control.

“Although the inflation data released last week for October was welcome news, it is too early to declare victory,” he said.

“Inflation remains very high and we need to ensure that we reduce it to the 2% target.”

Mr Bailey said the Bank’s interest rates are currently “restrictive”, meaning they are helping to curb inflation.

“If we maintain this stance for a long time, we will drive inflation out of the system. That’s what we’ll do,” he said.

He said that could mean interest rates would rise again if inflation remains more stable. He said interest rates would need to remain restrictive “for quite some time yet.”

“Let me be very clear: it is too early to be thinking about a rate cut,” Mr Bailey said.

Source: uk.finance.yahoo.com

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