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Bank of England governor Andrew Bailey expressed cautious optimism about inflation on Friday, emphasizing that it was still too early to declare victory despite recent improvements.
In a speech at the Jackson Hole summit, Bailey’s remarks differed from those of Federal Reserve chair Jay Powell, who called for interest rate cuts in the US.
The BoE recently cut interest rates for the first time in four years, citing a decrease in consumer price inflation from a peak in October 2022 to the target rate of 2% in May and June.
July’s inflation figures came in slightly below expectations at 2.2%, leading financial markets to anticipate unchanged interest rates in September and a potential cut in November.
Bailey noted that while inflation expectations seem to be more stable, it was too early to claim complete success as uncertainties remain.
He cautiously suggested that the economic costs of controlling inflation could be lower than previously thought, leading to a more gradual decline in inflation rates.
He anticipated a gradual decline in inflation rates, indicating a smoother economic adjustment.
Bailey acknowledged the challenges in predicting the persistence of inflation and emphasized the need for caution in assessing future economic trends.
In response to questions, Bailey highlighted the limitations of central bank interventions in addressing external factors such as the impact of global events on inflation.
Overall, Bailey’s remarks underscored the complex nature of managing inflation and the importance of a cautious approach in economic policy.