BoE's Bailey: Investors Price in 'Risk Premium' Over Energy Worries

Bank of England Governor Andrew Bailey says investors are pricing in a 'risk premium' when looking at market curves for interest rate expectations. This is due to concerns over further energy price increases, which he believes is being factored into policy tightening.

Bailey testified before parliament's Treasury Committee, addressing lawmakers about the central bank's analysis of investor behavior. According to Bailey, investors are pricing in additional tightening beyond what could be explained by expectations for Bank of England policy moves alone.

When breaking down the market curve, 'they've got essentially a risk premium in there,' Bailey said. He aimed to dispel the notion that interest rate hikes from the Bank of England were a foregone conclusion, contingent on economic developments rather than a possibility based on policy considerations.