The Bank of England Governor, Andrew Bailey, has suggested that the bank could be more “aggressive” when it comes to cutting interest rates. However, Bailey said that the pace of the reduction would depend on the rate of inflation. After its first decrease in four years in August, the bank could make further cuts when it holds its remaining year-end meetings in November and December. At the September gathering, Bailey had indicated his optimism that borrowing costs would continue to fall, but only if inflation remained low.
Bailey has also stated that the bank is monitoring the situation in the Middle East, and is particularly alert to the possibility of any increase in oil prices resulting in inflation. His comments could be seen in the context of the recent tensions between Israel and Hezbollah, which saw oil prices reach $76 a barrel. Although he was concerned about the potential impact of the current tensions in the Middle East, Bailey emphasized the importance of keeping the market stable.
Regarding the UK’s situation, Bailey stated that the government’s emphasis on capital investment to address infrastructural challenges was a positive move. The UK currently had several structural issues to address, including an ageing population, the demand for increased defence spending and intervention to combat climate change.
Following Bailey’s remarks about the potential for interest rate cuts to be accelerated, the pound fell by almost 1% against the dollar, to $1.317. Bailey’s indication that the bank is prepared to take more forceful actions to address inflation will be noted by markets internationally, as the UK’s economic growth outlook remains positive
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