Bank of England Governor Andrew Bailey suggested on Wednesday that the U.K. might see four interest rate cuts in the next year if inflation continues to decline. In a Financial Times video interview, Bailey confirmed that the central bank could implement four quarter-point cuts over the upcoming year if their projections of persistent inflation hold true.
Currently, market expectations indicate that the Bank of England will maintain interest rates at its December meeting, followed by three 25-basis-point rate reductions. If all four cuts are executed, the bank’s key interest rate would drop to approximately 3.75%, in addition to the two reductions already made this year. Bailey had previously mentioned the need for a gradual approach to rate cuts, starting with reductions over the summer.
Bailey emphasized the necessity of maintaining restrictive monetary policy until the risks to inflation reaching the 2% target in the medium term have diminished. He noted that consumer prices had decreased more rapidly than anticipated by the central bank, with inflation unexpectedly rising to 2.3% in October from 1.7% in September.
Despite this, the pound was trading steadily on Wednesday morning at $1.2671 by 11:52 a.m., recovering from earlier losses. Concurrently, the yield on the U.K.’s 10-year gilts remained stable at around 4.273%.
