Bank boss tells BBC he won’t rush interest rate rises
Bank boss tells BBC he won’t rush interest rate rises
Challenges in rate decisions amid global uncertainties
At the International Monetary Fund (IMF) meeting in Washington, Bank of England governor Andrew Bailey stressed that the central bank would not act hastily on interest rate changes, despite a “very big energy shock” affecting the world. He noted that increased oil and gas prices would inevitably influence inflation, yet the complexity of economic factors made rate decisions “very, very difficult” ahead of the next review on 30 April.
“There’s really difficult judgments to be made,” Bailey remarked. “We’re not going to rush to judgments on those things, because there are a lot of uncertainties around this, not just how it’s going to play out, but also how it’s going to pass through into the UK economy.”
The IMF warned earlier that central banks should avoid quick increases in borrowing costs following the Middle East conflict. Bailey acknowledged the IMF’s “serious advice,” highlighting that prior expectations of rate cuts had shifted due to the energy crisis. The threat of higher prices, driven by rising energy costs, now raises questions about whether rates will remain stable or rise this year.
When inflation spikes, central banks typically raise rates to curb demand. However, slowing economic activity often leads to rate reductions to stimulate spending. The dual effect of energy price hikes—pushing up costs while dampening growth—has complicated the Bank’s approach. Bailey emphasized that the UK’s heavy reliance on gas amplifies this challenge, but the key factor remains the conflict’s duration.
“The faster there is a resolution to this situation—particularly in terms of the supply of energy coming out of the Gulf—the easier and better the outcome will be,” he added. The UK government spokesperson noted that there is no current assessment Iran is targeting Europe with missiles, while US Treasury Secretary Scott Bessent argued that “a small bit of economic pain” was justified for long-term security.
UK chancellor Rachel Reeves criticized the Iran conflict during a media interview at the IMF event, citing its effects on prices and growth. Bessent, however, framed the situation as a trade-off between short-term economic strain and international stability, underscoring the divergent priorities in global policymaking.
