Over cautious?: Andrew Bailey initially dismissed inflation as ‘transitory’ before embarking on a series of 14 rate rises in a row
Bank of England governor Andrew Bailey faces another test of his credibility this week when new figures are expected to show inflation is being tamed.
The inflation rate is expected to have dropped to 4 per cent in November.
This is down from a peak of 11.1 per cent last autumn following Russia’s invasion of Ukraine.
The Bank last week decided to keep interest rates at a 15-year high of 5.25 per cent and warned that borrowing costs will remain elevated for ‘an extended period of time’ to curb price rises.
Financial markets disagree and expect four or five interest rate cuts next year, with the first as early as May.
Inflation has fallen sharply as economic growth has stalled. It could reach the Bank’s target rate of 2 per cent within six months – a year earlier than Bailey forecasts.
Bailey initially dismissed inflation as ‘transitory’ before embarking on a series of 14 rate rises in a row. Experts fear he could be slow to change course again and this may trigger a prolonged slump.
Independent economist Julian Jessop said: ‘The Bank currently lacks the confidence or the credibility to cut interest rates until it is certain that inflation is back under control.’
