BAILEY RULES OUT INTEREST RATE CUTS FOR REST OF YEAR

Andrew Bailey, Bank of England governor, stated that reducing interest rates remains "off the table at the moment" during remarks at the European Central Bank's annual conference in Portugal. Bailey said an earlier expectation that rates would be cut this year was removed in March and remains absent now. The monetary policy committee held rates at 3.75 per cent at its June meeting, a decision Bailey supported.

Bailey attributed the shift in outlook to inflationary pressures stemming from the war in the Middle East. He noted that whilst oil prices had fallen following a fragile peace agreement between the United States and Iran, they had not returned to pre-war levels. Brent crude, the international benchmark for oil prices, fell below $71 per barrel this week, its lowest point since late February when the conflict began. Official figures from the Office for National Statistics recorded inflation at 2.8 per cent in its latest release, remaining above the Bank of England's two per cent target. Bailey stated the Bank was "not happy" with the rate of inflation and was "not complacent at all".

Two members of the monetary policy committee — external member Megan Greene and chief economist Huw Pill — voted for a rate increase at the June meeting, warning that households showed greater sensitivity to inflationary shocks than they did in 2022. Kevin Warsh, chair of the Federal Reserve, stated that inflation risks in the United States had "come down" but reaffirmed commitment to achieving price stability.