3rd Oct 2024 08:28
(Alliance News) - Sterling fell on Thursday after the Bank of England Governor Andrew Bailey suggested the central bank could become "more activist" in cutting interest rates.
In a wide-ranging interview with the Guardian newspaper, Bailey held out the prospect of the BoE becoming a "bit more aggressive" in cutting interest rates provided the news on inflation continued to be good.
In response, sterling fell to USD1.3163 on Thursday morning from USD1.3271 at the time of the London close on Wednesday.
Inflation as measured by the consumer prices index currently stands at 2.2%, just above its official 2% target, but Bailey said he was encouraged by the fact that cost of living pressures had not been as persistent as the BoE thought they might be.
He said if the news on inflation continued to be good there was a chance of the Bank becoming more "a bit more activist" in its approach to cutting interest rates, now at 5%.
Bailey said the economy has proved more resilient than he feared two years ago, or even a year ago. "I think the economy has come through the shocks of the last five years better than many of us feared. So there’s a base there to develop."
"The government is right to focus on how to encourage capital investment. There is a clear need for it in terms of infrastructure. We’ve got at least three very big structural issues out there. One is the ageing population, which obviously we’re not alone in that one. Two is the demands for increase in defence spending. And the third one is dealing with climate change."
https://www.theguardian.com/business/2024/oct/03/its-tragic-bank-of-england-governor-watching-middle-east-crisis-closely
Questioned about the Middle East crisis Bailey said he was watching developments "extremely closely".
But he said that there were limits to what could be done to prevent the cost of crude oil rising if things "got really bad".
"Geopolitical concerns are very serious," Bailey said. "It’s tragic what’s going on. There are obviously stresses and the real issue then is how they might interact with some still quite stretched markets in places."
Bailey said his sense from conversations with counterparts in the region, is that there is, for the moment, "a strong commitment to keep the market stable."
By Jeremy Cutler, Alliance News reporter
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