BoE Chief Bailey Says Rate Cut Expectations Not Unreasonable

(RTTNews) - Bank of England Governor Andrew Bailey said it is not unreasonable for the markets to expect interest rate cuts this year.

The BoE does not endorse the market curve, Bailey told lawmakers on the Treasury Select Committee.

The governor said U.K. inflation need not fall to the 2 percent target in order to cut interest rate.

Bailey also said the bank will not make a prediction regarding when or how much the rate will be reduced.

At the February meeting, the central bank had kept the bank rate unchanged at 5.25 percent.

The rate was lifted by a cumulative 515 basis points since December 2021 to the current level, which is the highest since early 2008.

The economy is at full employment and it is a very good story, said Bailey. The economy is already showing distinct signs of an upturn, the central banker added. Further, the BoE governor added that a recession in the U. K. will be very small.

Deputy Governor Ben Broadbent said at the hearing that an interest rate reduction is possible this year.

However, the timing of any adjustment will depend on the economic data, the policymaker added.

Swati Dhingra, an external MPC member and who sought a quarter-point cut in the February meeting, said high interest rate poses risks to the economy.