Bank of England governor Andrew Bailey warned the economy is too weak for interest rates to start going up yet – as they were left on hold yesterday.
The Bank’s Monetary Policy Committee (MPC) voted by a 7-2 majority to maintain its benchmark rate at 3.75 per cent despite fears of rising inflation caused by the Iran war choking off energy supplies.
Inflation, at 2.8 per cent, is above the Bank’s 2 per cent target, and is expected to rise further this year.
But Bailey argued rate-setters should not try to force it down too quickly, and in doing so, cause ‘undesirable volatility’ in economic output.
He said that given the ‘softness in the real economy’ and uncertainty about the impact of the energy shock, ‘tolerating temporarily above-target inflation’ may be appropriate.
