Bank of England Governor Andrew Bailey indicated that the recent turmoil in financial markets may become a headwind for the UK economy that could have an impact on the next interest rate decision.
(Bloomberg) — Bank of England Governor Andrew Bailey indicated that the recent turmoil in financial markets may become a headwind for the UK economy that could have an impact on the next interest rate decision.
“We see some evidence of some tightening credit conditions, but we do not see a critical development in that respect,” Bailey told members of Parliament in a hearing Tuesday. “We always take into account credit conditions when setting monetary policy.”
The remarks add to doubts that policy makers will keep raising rates after the quickest tightening spree in three decades. Investors are pricing in just one more quarter-point increase in the bank rate which at 4.25% is the highest since the global financial crisis in 2008.
Bailey said the UK banking system remains sound despite efforts by investors to probe a number of institutions for weakness. He said officials at the BOE are “in a good position from the point of view of assessing the impact of raising interest rates on the position of the banks themselves.”
Deputy Governor Dave Ramsden said the BOE is looking carefully at how higher borrowing costs are impacting consumers and businesses.
“We have to be very vigilant to those risks from higher interest rates playing out in other parts of the economy,” Ramsden said. “That plays into the volatile and challenging environment.”
Readd more:
- Bailey Suggests BOE Won’t Lift Rates Back to Pre-Crisis High
- BOE Governor Says Global Markets Are Testing Banks for Weakness
- BOE Policy Makers Split on View of UK Financial Conditions
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