UK interest rate cuts ‘in play’, says Bank of England governor

In a signal that Threadneedle Street is preparing the ground for a cut in borrowing costs within months, Andrew Bailey told the Financial Times: “All our meetings are in play.

However, its rate-setting monetary policy committee said there were “encouraging signs” of falling inflation that could open the door for interest rate cuts in future.

The Bank of England governor, Andrew Bailey, says: ‘The fact that we have a curve that has cuts in it for the year as a whole is not unreasonable to me.’ Photograph: WPA/Getty ImagesFinancial markets are betting on a first quarter-point cut in June, with expectations for two more reductions before the end of the year to about 4.5% amid a sharp fall in inflation over recent months.

However, the Bank has warned that inflation could return above its target later this year amid resilient levels of wage growth and rising prices in the service sector of the economy.

Economists believe the central bank will therefore wait for at least two more months of official inflation and jobs market data before taking action.

Bailey said he was “not seeing a lot of sticky persistence [in inflation] coming through at the moment”, while suggesting progress was being made in the economy to recover from a shallow recession at the end of 2023.