BoE Chief Expects Four Rate Cuts Next Year as Inflation Tapers Off - FT

Andrew Bailey, welcoming the recent decrease in inflation, stated on Wednesday that the Bank of England expects to make four interest rate cuts next year, provided that the outlook for the UK economy remains positive. Speaking at the FT's Global Boardroom conference, the BoE Governor mentioned that consumer price inflation has dropped more quickly than policymakers anticipated a year ago.

When asked about investor expectations regarding the four quarter-point interest rate cuts included in the economic forecasts in November, Bailey said, "We always condition what we publish in terms of projections around market interest rates, and as you rightly pointed out, the market's view was in that direction."

He added, "We are looking at a range of potential paths, some of which are better than others."

UK inflation has significantly decreased from its peak of 11.1% at the end of 2022, with price increases recorded at 2.3% in October, above the official target of 2%.

After reducing the benchmark interest rate to 4.75% with two quarter-point cuts this year, the BoE signaled a readiness for further reductions in borrowing costs, but is proceeding with caution due to concerns over persistent service inflation.

Bailey indicated that while a variety of inflation scenarios are possible, the central forecast in the BoE's recent monetary policy report implies "gradual" interest rate cuts. He spoke during a time when the OECD forecasts that due to growth and inflation expectations, the BoE will not be able to cut rates as much as its counterparts like the US Federal Reserve and the European Central Bank.