Bank of England Governor Andrew Bailey indicated that interest rates are likely to continue their gradual downward trajectory, though the central bank is in no hurry to implement rapid cuts.
Bailey also expressed his optimism about the recent decline in inflation, stating, "Inflation has come down a long way... and I’m very encouraged that the path is downwards. Therefore, I do think the path for interest rates will be downwards, gradually."
The BoE's key rate remains at 5%, unchanged since the central bank cut it by a 0,25% in August, which marked the first reduction in over four years. This came as a response to cooling inflation pressures. Investors are now anticipating another rate cut in November when the BoE releases updated projections for economic growth and inflation.
Despite the possibility of further rate cuts, Bailey cautioned that the central bank must proceed carefully. He emphasized that while lower rates are expected, the BoE needs to avoid moving too quickly, to ensure the economy remains stable.
When asked about the long-term outlook for interest rates, Bailey clarified that the exceptionally low rates seen during the Covid-19 pandemic are unlikely to return. He suggested that rates will instead stabilize at what he termed a "neutral rate" - a level neither overly restrictive nor stimulative.