By LONDON (Reuters) -The Bank of England cut interest rates on Thursday for only the second time since 2020 and said future reductions were likely to be gradual, seeing higher inflation and growth after the new government’s first budget.
Here’s what Bank of England officials said in a press conference following that decision:
BANK OF ENGLAND GOVERNOR ANDREW BAILEY
On the U.S. election result:
“We’ll watch it very closely… I’m not going to make any presumptions about what will happen, because I don’t think that’s either a) consistent with our policy remit or b) wise, frankly. I think let’s see what happens.”
“We will no doubt over time be able to get a better sense of a) what the policies are and then b) how they might affect the UK economy, and of course we’ll do that. But… I don’t think it’s useful or wise to enter into speculation (as to) what they might be, because we just don’t know.”
“We work with all U.S. administrations … We will look forward to working with the new U.S. administration. We worked with the previous Trump administration. We work with the current administration.”
“That’s what we do. We do it without any … presumptions and we will do that constructively.”
On the path of interest rates:
“There is a world in which we will move gradually, and we have emphasized that today, because I think there is considerable uncertainty out there in the world.
“We have made more progress on disinflation than we expected to, and that is very good news … if that progress continues, then we will respond to it.”
On the Oct. 30 budget:
“We provisionally expect the measures announced in the budget to boost the level of GDP by around three quarters of a percent at their peak in a year’s time. This reflects the stronger and relatively front-loaded paths for government consumption and investment, more than offsetting the impact on growth of higher taxes.
“Overall, fiscal policy is still expected to tighten over the forecast, but all else equal, the changes announced in the budget are expected to reduce the margin of spare capacity in the economy over the forecast period.”
On the impact of the budget on interest rates:
“I don’t think that it’s sensible to conclude that the path of interest rates will be particularly different.”
On inflation:
“We still need to see services price inflation come down more broadly to keep headline consumer price inflation at the 2% target.”
On the labour market:
“Developments in the UK labour market continue to be very important for assessing developments in inflationary pressures. There are mixed signals from the data.
On global risks:
“We do have to watch very carefully the fragmentation of the world economy.
“There are a lot of risks attached to the fragmentation of the world economy … let’s see what happens. It’s too early to judge.”