Bank boss tells BBC he won’t rush interest rate rises

Bank of England Governor Hesitant on Interest Rate Adjustments

Andrew Bailey, the Bank of England’s top official, expressed that the central bank will not make hasty decisions about raising interest rates, even amid a global energy crisis. During a BBC interview at the International Monetary Fund (IMF) conference in Washington, he noted that elevated oil and gas prices would inevitably influence inflation. However, he stressed that other variables complicate the rate-setting process, especially with the next decision approaching on 30 April.

“There’s really difficult judgments to be made,” Bailey remarked. “We’re not going to rush to judgments on those things, because there are a lot of uncertainties around this, not just how it’s going to play out, but also how it’s going to pass through into the UK economy.”

Earlier this year, the Bank was anticipated to reduce rates, but the Middle East conflict has shifted expectations. The threat of higher energy costs has sparked debates about whether rates might stay stable or even climb. Central banks typically raise rates to curb demand when inflation surges, yet they lower them to stimulate spending when economic activity declines. The current situation, where energy prices could both elevate inflation and dampen growth, presents a complex challenge.

Before the US-Israeli strikes on Iran six weeks ago, signs pointed to a softening labor market and businesses struggling to pass on rising costs to consumers. These factors suggested inflation might not persist. However, Bailey acknowledged the need for further data to assess the conflict’s impact on the UK’s economy, including its effects on prices and activity.

He highlighted the UK’s reliance on gas as a critical factor, emphasizing that the conflict’s duration will determine the outcome. “The faster there is a resolution to this situation—particularly in terms of energy supply from the Gulf—the better the result,” he added. Meanwhile, UK Chancellor Rachel Reeves criticized the war on Iran, citing its effect on prices and growth, during a media appearance at the IMF event. In contrast, US Treasury Secretary Scott Bessent argued that a “small bit of economic pain” is justified for long-term security, suggesting Iran’s nuclear threat outweighs short-term costs.

A UK government spokesperson clarified there was no evidence Iran aimed to target Europe with missiles. The IMF, in its warning, suggested the US-Israeli conflict could push the global economy into recession, with the UK likely to suffer the most among major economies.