Bank ‘in no rush to rates rates’ says governor – Daily Business

Andrew Bailey: ‘difficult judgements’

The Bank of England is in no rush to raise interest rates, according to its governor, despite the impact of the Iran War on the cost of energy and other commodities that will see a rise in inflation.

Andrew Bailey conceded that a “very big energy shock” is under way but cautioned businesses and the markets against assuming a sharp reversal of policy on borrowing charges.

Ahead of the next meeting of the Bank’s rate-setters on 30 April, he said there were “difficult judgments to be made” about the UK economy as the war in Iran raises the prospect of higher energy prices.

Speaking at the International Monetary Fund (IMF) spring meeting in Washington DC, he said: “There are really difficult judgments to be made.

“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.”

The IMF said in its latest outlook report that the UK would be hit the hardest among G7 nations. It would lift inflation to double the Bank of England’s target, in part because the UK relies heavily on gas imports.

UK economic growth this year is predicted to be 0.8%, 0.5 percentage points lower than the fund’s January prediction of 1.3% and the largest downgrade for any of the leading economies.

Better news for the UK came from the Office for National Statistics which said the economy grew significantly faster than expected in the month before the Iran war started, although the conflict is likely to derail the positive momentum. 

Gross domestic product (GDP) increased by 0.5% in February, sharply ahead of the 0.1% expected by economists. Growth for January was also upgraded to 0.1%, having previously been estimated to be flat. 

Grant Fitzner, the ONS chief economist, said: “Growth increased further in the three months to February, led by broad-based increases across service.

“Meanwhile, car production recovered from the effects of the autumn cyber incident. Growth in services and production was partially offset by another fall in construction.”

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