LONDON — Bank of England (BoE) Governor Andrew Bailey has tempered market expectations that UK interest rates could rise nearly four times over the coming year, saying that the current economic outlook remains too uncertain to predict.
His remarks came after the BoE kept interest rates unchanged on Thursday, 17 September, while warning of increasing inflationary pressures.
“We had a lot of discussion this time, but we did not discuss the possibility of raising interest rates four times,” Bailey told reporters following the decision, according to Reuters.
Bailey acknowledged that financial markets need to form their own expectations regarding the future path of interest rates.
However, he said the current economic environment remained too uncertain to draw firm conclusions about the direction of monetary policy.
Bailey has previously commented on market expectations. In April, he said markets had moved too quickly in pricing in a series of interest-rate increases. In July, he also stressed that an interest-rate rise towards the end of the year was far from certain.
Against this backdrop, the BoE announced a new approach on Thursday to reducing its holdings of UK government bonds, known as gilts.
The central bank will stop actively selling long-dated government bonds and suspend active gilt sales for the next six months.
Bailey stressed that the decision was not prompted by recent volatility in the UK bond market.
Yields on 30-year UK government bonds had risen to their highest level since 1998 earlier in the week.
“We had planned this move well before the conflict broke out in the Middle East, so this is absolutely not a reaction to market conditions,” Bailey said.
Source from IDN Financials
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