Bailey Reiterates Subdued Inflation Outlook Amid Ongoing Energy Price Uncertainty

Bank of England Governor Andrew Bailey has expressed his concerns about the impact of energy prices on inflation in the UK. In an interview at a U.S. Federal Reserve conference, he stated that there is little sign of serious longer-term inflation pressures in Britain due to the surge in energy costs caused by the U.S.-Iran conflict.

Bailey noted that despite higher energy costs, second-round inflationary effects remain subdued, supported by a looser labour market that dampens wage bargaining. The Monetary Policy Committee (MPC) recently held rates at 3.75%, with six of nine members, including Bailey, against a hike amid ongoing uncertainty around energy-price persistence and inflation dynamics.

Bailey also cautioned that financial markets' anticipation of a quarter-point rate increase before the end of the year is based on market concerns about the U.S.-Iran conflict rather than the BoE's policy outlook. He highlighted a soft labour market as one factor restraining inflation, but added that he could make no promises about how the economy would develop in future.