Bank of England Governor Andrew Bailey hinted that interest rates could remain at peak levels for longer than traders currently expect.
(Bloomberg) — Bank of England Governor Andrew Bailey hinted that interest rates could remain at peak levels for longer than traders currently expect.
“I’ve always been interested that the market thinks the peak will be short-lived in a world where we’re dealing with more persistent inflation,” he said on a panel Wednesday afternoon.
Speaking at the European Central Bank Forum on Central Banking in Sintra, Portugal, he noted that several more rate hikes are being priced in following the most aggressive tightening cycle in three decades.
Money markets are currently betting that the benchmark rate will peak below 6.25% by February. It is then expected to remain on hold for at least six months, with the first quarter-point cut priced in by September next year.
“My response to that would be, ‘We’ll see,’” Bailey said, noting that the BOE’s rate decisions were “essentially evidence-driven.”
Bailey said inflation was more persistent than expected due to a tight labor market fueled by higher wage-setting, and a more resilient economy.
But he denied that labor market tightness was being driven by Brexit, instead attributing it to “the response to Covid.”
Bailey added that the BOE was also looking at how artificial intelligence would affect the economy, and how it could use the technology in its own analytical and operational functions.
Read more:
- Schroders Sees BOE Rate at 6.5%, Driving Economy Into Recession
- Top Central Bankers See Further Tightening to Counter Inflation
- UK Hotter-Than-Expected CPI to Reinforce Peak Rate Bets
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