Bank of England Governor Andrew Bailey addressed the slowing inflation in a statement on Monday, mentioning that the anticipated rise in price growth later in the year was unlikely to lead to long-term inflationary pressures. Bailey emphasized that regulated price increases, such as for domestic energy and water, were contributing to the projected inflation uptick. Furthermore, he noted that the economic slowdown was expected to counteract inflation.
Bailey stated, "The context does not support the expectation of increased persistence," underlining the BoE's approach. Despite recent data reflecting fourth-quarter economic conditions, Bailey emphasized that the overarching economic outlook remained unchanged. The BoE recently revised down its interest rate to 4.5% and lowered its forecast for 2025 economic growth to 0.75%.
Regarding inflation projections, Bailey expressed that the BoE anticipated a rise to 3.7% later in the year, nearly double the 2% target, leading the central bank to adopt a cautious stance on gradual interest rate reductions. Bailey highlighted ongoing disinflation trends but noted that careful considerations were essential due to two-sided risks.
Bailey underscored the impact of U.S. trade tariffs on British inflation, raising uncertainties about their effects on the global economy. He welcomed Federal Reserve Chair Jerome Powell's commitment to implementing Basel 3.1 capital rules in the U.S. Bailey described the extension of the rules' adoption in Britain to January 2027 as a response to uncertainties surrounding U.S. policy during Donald Trump's presidency.