LONDON (Reuters) – Governor Andrew Bailey and other top Bank of England officials spoke to reporters after the British central bank raised its key interest rate by a quarter of a percentage point to 5.25% on Thursday.
Below are quotes from Bailey and other members of the Monetary Policy Committee at their press conference.
BOE GOVERNOR BAILEY ON WHERE RATES ARE HEADED
“I’m not going to judge what the path of rates will be. Not least because as the report indicates more than one path may deliver inflation back to target sustainably.”
“We had some unpleasant surprises in June, we’ve seen some of that turn around, which is frankly, you can put into context today, why I don’t think, speaking personally, I don’t think there was a case for a 50 basis point raise today.”
“We hope that we can deliver the path that we’ve set out in the report, because the path we’ve set out in the report does not have a recession in it. We will have to see.”
“There is no presumed path of interest rates from here.”
BOE GOVERNOR BAILEY ON DIRECTION OF INFLATION
“We expect inflation to take a further step down in the July data which will be published in two weeks time, I think that will come down to around 7% at that point… followed by another larger step down in October’s data.”
“We do expect core goods inflation to ease over the rest of the year. And there are indicators that suggest it could happen faster than our projection.”
“The evidence has gone one way then gone a bit the other way. So I don’t think it is time to sort of declare it’s (the fight against inflation) all over and we’re sort of sitting where we are for the moment, because I think that really does sit at odds with the fact that we’ve had some very big pieces of news and they’re not going in the same direction.
“So we have to remain evidence driven. We’ve continued to use language which we’ve used before, which is to say, if we get more evidence of more persistent inflation, then we will have to react to that.”
BOE GOVERNOR BAILEY ON WAGE-PRICE SPIRAL
“I wouldn’t agree with that … I think the path of inflation and the first half is now much more assured,” he said, when asked whether the bank has lost control.
BOE GOVERNOR BAILEY ON LABOUR MARKET, WAGE INFLATION
“A lot will depend on what happens in the labour market, and to pay. There are signs that the labour market is loosening.”
“In our judgement, upside surprises on wage inflation suggests that it will take longer for second round effects to go away than it did for them to appear in response to the sharp rise in prices of many imported goods over 2021 and 2022.”
“Other parts of the labour market I think are softening, but that pay element of the labour market hasn’t.”
BOE GOVERNOR BAILEY ON THE HOUSING MARKET
“We are seeing of course some adjustment in the housing market.”
“Yes we’ve seen some decline in house prices, on the other hand, the latest numbers suggests… that the was a small increase in net lending… and a small increase in mortgage approvals.”
“The evidence on the housing market is, yes, there is an adjustment, of course, I don’t think we should be surprised at that. But I would certainly not wish to talk this up into a crisis in the housing market, because I think there’s plenty of evidence that suggests that this is a process that has some moderating influences in it as well.”
BOE DEPUTY GOVERNOR RAMSDEN ON CONSECUTIVE RATE RISES
“The risks on persistence have been crystallising prior, through this year. That’s why we’ve been having to raise rates in response to increasing evidence on persistence. So it’s not suddenly that that evidence has appeared, we’ve been seeing that evidence for some time, which is why we’re having to keep raising rates.”
BOE DEPUTY GOVERNOR BROADBENT ON BRINGING INFLATION DOWN SUSTAINABLY
“We have to make sure inflation comes down sustainably to target, and therefore we have to be focussed on making sure that that average interest rate, given the information we have right now, is sufficient to ensure that happens.”
“Our focus is very much on the medium term, and we have to (en)sure that interest rates over that period are sufficiently restrictive.”
“What we can say is we think we’re seeing evidence that the rate of interest is above the neutral rate without saying precisely what that is because we’re beginning to see an effect on demand – that’s what we’re prepared to say.”
BOE GOVERNOR BAILEY ON SERVICE PRICE INFLATION
“Service price inflation was 7.2% in June, which was higher than we projected in May, and it remains high in our near term projection for the rest of the year… Now this upside surprise was primarily driven by some of the more volatile subcomponents of services prices, such as air fares and package holidays, and also vehicle excise duty which is unrelated to the balance of demand and supply in the economy, so we should not read too much into this surprise for this reason.”
BOE GOVERNOR BAILEY ON FOOD PRICE INFLATION
“Where there is more uncertainty is around the time it will take the other non-energy components of the consumer price inflation to come down as well. Price inflation for food and non-alcoholic beverages has been very high. But it does appear to have peaked.”
“We do expect that food price inflation will come down gradually over the rest of this year.”
“Food price inflation is declining, and it’s going to go on declining. It’s taking longer than I think anybody expected.”
(Compiled by Sarah Young and UK bureau)
