Bank boss tells BBC he won’t rush interest rate rises

Bank of England Governor Stresses Caution on Rate Decisions Amid Energy Crisis

Andrew Bailey, head of the Bank of England, emphasized that the UK’s central bank would not accelerate its rate hike decisions, despite global challenges like a “very big energy shock.” During a BBC interview at the International Monetary Fund (IMF) meeting in Washington, he highlighted that elevated oil and gas prices would likely influence inflation, yet other variables complicated the timing of any rate adjustments. The next pivotal decision is set for 30 April, with Bailey acknowledging the difficulty of weighing the economic impact.

IMF Advises Against Hasty Rate Increases

The IMF warned on Wednesday that central banks should avoid rapid increases in borrowing costs following the Middle East conflict. Bailey noted the Bank of England was carefully considering this “serious advice,” which had shifted earlier expectations of rate cuts. Prior to the US-Israeli attacks on Iran six weeks ago, the Bank had anticipated lowering rates this year, but rising energy costs have since sparked new speculation about maintaining or raising rates.

“There’s really difficult judgments to be made,” said Bailey. “We’re not going to rush to judgments on those things, because there are a lot of uncertainties around this, not just how it’s going to play out, but also how it’s going to pass through into the UK economy.”

Conflict’s Dual Economic Impact

Higher energy prices could both inflate costs and slow economic growth, according to Bailey. This dual effect is intensifying the Bank’s challenges in balancing inflation control with growth support. He pointed to signs of a softening labor market and businesses struggling to pass on price increases, which suggested inflation might not persist. However, the Bank still awaits “meaningful data” to gauge the conflict’s influence on the UK economy.

“The real determinant here is the duration of [the conflict],” he added. “The faster there is a resolution to this situation – I particularly mean in terms of the supply of energy coming out of the Gulf – the easier and better the outcome will be.”

Political and Economic Perspectives

UK Chancellor Rachel Reeves criticized the Iran conflict during a media interview at the IMF event, citing its potential to raise prices and hurt growth. In contrast, US Treasury Secretary Scott Bessent argued that a “small bit of economic pain” was justified for long-term international security. He cited the threat of nuclear missiles from Iran as a key reason for prioritizing stability over immediate economic easing.

A government spokesperson clarified: “There is no assessment Iran is trying to target Europe with missiles.” Bessent’s remarks coincided with the IMF’s warning that the US-Israeli war with Iran could trigger a global recession, with the UK facing the most severe consequences among major economies.