Bank of England Governor Andrew Bailey expressed cautious optimism on Friday about easing inflation pressures in the UK economy, though he emphasized that it was too early to be certain. Speaking ahead of a central banking conference organized by the Federal Reserve in Jackson Hole, Wyoming, Bailey noted that inflation in Britain appeared to be becoming less persistent than in recent years.
“We are now seeing a revision down in our assessment of that intrinsic persistence, but this is not something we can take for granted,” Bailey said in his speech, which was released by the central bank.
On August 1, the BoE reduced its main interest rate to 5% after maintaining it at a 16-year high of 5.25% for nearly a year. At the time, Bailey warned that the BoE would “be careful not to cut interest rates too quickly or by too much.”
In his Friday speech, Bailey noted that recent economic signals made him “cautiously optimistic that inflation expectations are better anchored.” However, he also warned that it was “too early to declare victory” and stressed that it remains uncertain whether inflation pressures will ease to levels consistent with the BoE’s 2% inflation target on a sustained basis.
Investors are currently pricing in a roughly one in three chance that the BoE will cut interest rates by a further quarter-point at its September meeting. Earlier on Friday, at the Jackson Hole event, Federal Reserve Chair Jerome Powell indicated that the time had come for the U.S. central bank to cut borrowing costs.
