- Recession may have ended
- Inflation reduction efforts continue
- Rate cuts uncertain
Andrew Bailey informed a committee of Members of Parliament that the recession may have ended by the second half of last year, following official data indicating a mild recession.
The Governor of the Bank of England stated that, despite the country entering a recession in late 2018, there are “clear indications of a recovery” in the UK economy.
Andrew Bailey explained to the committee of Members of Parliament that he believed the recession would be one of the shallowest of any in modern history, while justifying the Bank’s efforts to reduce inflationary pressures by curbing economic demand.
He spoke for the first time since the Office for National Statistics (ONS) reported negative output in an early estimate of gross domestic product between October and December of last year.
As a result, the England entered a technical recession, as its economy had also experienced quarterly declines in growth.
Mr. Bailey emphasised that the Bank’s aim in implementing fourteen consecutive interest rate increases was to reduce inflation to its target level of 2% to facilitate sustainable growth.
Since the Bank’s Monetary Policy Committee halted rate hikes last summer, concerns about the trajectory of inflation later in the year have prevented a reduction.
Mr. Bailey stated that one of the risks is the condition of “full employment” in the United Kingdom.
Mr. Bailey characterised it as positive news because it implied the economy was in better shape than the headline figures suggested, but cautioned that its potential impact on demand posed a threat to efforts to contain inflation.
Additionally, concerns about energy costs and shipping disruptions in the Red Sea were cited as factors contributing to price increases in the latter half of 2024.
When asked about financial market bets on the Bank’s potential to initiate rate cuts in late spring, Mr. Bailey replied, “We do not endorse the market curve.”
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“We do not predict when or by what amount rates will be reduced,” he stated.
However, based on that forecast profile, he believes it is not implausible for the market to contemplate the following.
“Data, not dates,” will determine any rate reduction, stated Ben Broadbent, the deputy governor.
