Bank boss tells BBC he won’t rush interest rate rises
Bank of England Governor Declines to Hasten Interest Rate Increases
At the International Monetary Fund (IMF) meeting in Washington, Governor Andrew Bailey of the Bank of England stated that the UK central bank will not act quickly to raise interest rates, even as global markets face a significant energy crisis. He highlighted that while increased oil and gas prices would inevitably influence inflation, the decision on rates remains complex due to multiple uncertainties.
IMF Advises Against Rushing Rate Hikes
The IMF issued a warning on Wednesday, advising central banks to avoid hasty increases in borrowing costs following the Middle East conflict. Bailey acknowledged the IMF’s “serious advice” as he evaluated the implications of the ongoing situation. Prior to the US-Israeli strikes on Iran, the Bank of England was anticipated to cut rates this year, but the potential for higher prices due to energy costs has shifted expectations.
“There’s really difficult judgments to be made,” Bailey remarked. “We’re not going to rush to judgments on those things, because there are a lot of uncertainties around this, not just how it’s going to play out, but also how it’s going to pass through into the UK economy.”
Higher energy prices could simultaneously drive up inflation and slow economic growth, complicating the Bank’s approach. Before the conflict, signs suggested the labor market was easing and businesses were struggling to pass on price increases to consumers, which pointed to inflation not being a long-term issue. However, the Bank is still awaiting “meaningful data” to assess the conflict’s effects on the UK economy, as well as its influence on prices and activity.
Energy Dependency and Conflict Duration
Bailey noted that the UK’s “strong dependency on gas” would amplify the impact of the crisis, yet stressed that the key factor lies in the length of the conflict. He added that a swift resolution—particularly in terms of energy supply from the Gulf—would lead to a more favorable economic outcome. “The faster there is a resolution to this situation,” he said, “the easier and better the outcome will be.”
Meanwhile, UK Chancellor Rachel Reeves expressed criticism of the Iran conflict during a media interview at the IMF event, citing its effect on inflation and growth. In contrast, US Treasury Secretary Scott Bessent argued that some economic pain was justified for long-term international security, suggesting Iran’s nuclear threat to the UK outweighs immediate economic concerns. A UK government spokesperson clarified that there is no evidence Iran is targeting Europe with missiles.
