LONDON (Reuters) -Bank of England Governor Andrew Bailey said on Monday that it was “far too early to be thinking about rate cuts” and borrowing costs might have to go up again if there were signs that inflation was proving more persistent than expected.
“When inflation is high, we take no chances,” Bailey said in the text of a speech he was due to deliver at an event organised by the National Farmers’ Union, echoing his recent comments that discussion of lowering interest rates was premature.
The BoE kept rates on hold for the second meeting in a row this month after 14 consecutive increases to fight an inflation rate that peaked at above 11% in October 2022 before falling to 4.6% in October this year.
Bailey said the conflict in the Gaza Strip had added to risks that inflation could go back up.
“We must watch for further signs of inflation persistence that may require interest rates to rise again,” he said.
Investors are betting on the BoE cutting its benchmark borrowing rate by a quarter-percentage point in June next year. Earlier this month, BoE Chief Economist Huw Pill said it was “not totally unreasonable” to think about a rate cut around August 2024 which was priced into the market at the time.
Bailey has sought to combat that kind of speculation and he said on Monday that the squeeze on real incomes from higher food and energy prices may still be influencing wage demands.
“The Monetary Policy Committee’s latest projections indicate that monetary policy is likely to need to be restrictive for quite some time yet,” he said in his speech.
(Reporting by William Schomberg and Muvija M; Editing by Sandra Maler)
