Bank of England governor talks up interest rate cut prospects as inflation eases to 3.2%
The governor of the Bank of England has signalled the UK is still on course for an interest rate cut as official figures show a further easing in the pace of price growth in the economy.
Andrew Bailey was speaking hours before the Office for National Statistics (ONS) revealed that the consumer prices index (CPI) measure of inflation slowed to 3.2% in the 12 months to March – the weakest level for two-and-a-half years.
That was down from the 3.4% figure measured the previous month but slightly above economists’ expectations.
ONS chief economist Grant Fitzner said of the shifts seen last month: “Once again, food prices were the main reason for the fall, with prices rising by less than we saw a year ago.
“Similarly to last month, we saw a partial offset from rising fuel prices.”
A lower inflation rate is welcome for long-suffering households who are seeing a rise in spending power due to wages rising at a faster pace than prices.
A further boost is expected to come from the Bank of England in the coming months as energy-driven inflation continues to ease, with a sharp reduction in CPI this month being widely tipped to take the main measure of inflation towards the Bank’s 2% inflation target.
Some economists expect the Bank to begin the process of withdrawing its medicine to combat inflation in June.
An interest rate cut, from the current 5.25% level, would have the effect of trimming many borrowing costs that have exacerbated the squeeze on personal finances such as through higher mortgage rates.
Mr Bailey told an International Monetary Fund event in Washington: “In the UK we’re disinflating at what I call full
employment.
“I see, you know, strong evidence now that that process is working its way through.
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March: Bank of England governor: ‘We’re on the way’
“Our judgement with interest rates is ‘how much do we need to see now to be confident of the [disinflation] process’.”
But there is a growing school of thought that the Bank may have to hold off on a rate cut.
LSEG data shows a majority of financial market participants now expect a first rate cut in August or even September.
The worries include the threat posed by rising oil costs as the conflicts in the Middle East continue to evolve and the fact that UK wage growth is now running at levels almost double the inflation rate.
Another is emerging from the United States.
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US economy suffering ‘vibecession’?
There, the chair of its central bank has warned that the chances of an imminent interest rate cut have faded as the world’s largest economy runs hot.
The problem for the Bank of England in the wake of Jay Powell’s remarks on Tuesday is that any UK rate cut ahead of the Federal Reserve risks weakening the value of the pound against the dollar.
That would raise the cost of importing key goods priced in dollars such as commodities including oil – and stoke inflation.
Mr Bailey acknowledged: “The dynamics for inflation are rather different now, between Europe… and the US.
“I think there’s more demand-led inflation in the US than we’re seeing,” he added.
UK
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Two firefighters and a member of the public have died in a large fire in Bicester, the fire service announced.
The firefighters died in the inferno at a former RAF base in Oxfordshire, which now hosts historic motoring and aviation centre Bicester Motion.
The local fire service was called to the scene at 6.39pm last night.
Chief Fire Officer Rob MacDougall said: “It is with a very heavy heart that we today report the loss of two of our firefighters. Families have been informed and are being supported.
“Our thoughts are with them at this most difficult of times and we ask for privacy to be respected.
“We cannot release any details at present but will provide further information as soon as we can.”
Two other firefighters sustained serious injuries and are currently being treated in hospital, Oxfordshire County Council said in a statement.
Footage shared on social media shows plumes of smoke billowing into the sky and flames swallowing the large building.
Clouds of smoke from the fire were billowing into the sky last night. Pic:@kajer87X
Two firefighters and one other person died in the fire, while two more firefighters were seriously injured. Pic: PA
Ten fire crews attended the incident, with four remaining at the scene. The fire is still ongoing, but it is considered under control.
Local residents were advised to remain indoors and keep their windows shut, but this advice has now been lifted.
Bicester Motion said in a statement it would be closed today and over the weekend.
The cause of the fire is not yet known.
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