Bank of England Governor: Interest Rate Cut Off the Table for Now
Andrew Bailey indicates that borrowing costs are unlikely to decrease in the near future due to economic uncertainties.
Bank of England Governor Andrew Bailey has stated that any plans to cut interest rates are currently "off the table." Speaking at the European Central Bank's annual conference in Portugal, Bailey noted that while a decrease in oil prices following a peace agreement between the U.S. and Iran was "encouraging," they have not yet returned to pre-war levels.
"There was an expectation that we would cut rates this year," Bailey said. "That was off the table in March, and it's off the table at the moment."
Financial markets now anticipate that the Bank will maintain borrowing costs at 3.75 percent for the remainder of 2026. Earlier this year, markets had expected rates to be cut, but the conflict in Iran prompted policymakers to pause these considerations.
Bailey explained his decision not to vote for an interest rate increase thus far in 2026 was due to evidence of a weakening economy and labor market in Britain. "We've got a softening economy, so we're seeing a softening labour market, we're seeing some softening of activity... We had that before the hostility broke out in the Gulf," he stated.
He added that by holding rates in March, the Bank had effectively removed the possibility of a rate cut from consideration, leading to a 1 percent increase in mortgage rates.
Brent crude oil recently fell below $71 per barrel, its lowest point since the war began at the end of February. The Bank's policymakers are closely monitoring the impact of higher oil and gas prices on the broader economy and inflation.
Bailey indicated that the Bank "will be looking at all the evidence again" when they convene on July 30. He had previously told CNBC that the Bank was "not happy" with the current rate of inflation in Britain and was "not complacent at all."
Inflation in Britain remained at 2.8 percent in the latest Office for National Statistics release, still significantly above the Bank's target of two percent. In the Bank's June meeting, two members of the Monetary Policy Committee, external member Megan Greene and chief economist Huw Pill, voted in favor of an interest rate hike, expressing concern that households are more vulnerable to inflationary shocks than they were in 2022. The committee ultimately voted 7-2 to hold borrowing costs at 3.75 percent.