SINTRA, Portugal, July 1 (Reuters) – The Bank of England is not in a position to consider cutting interest rates, Governor Andrew Bailey said on Wednesday, despite oil prices falling back near pre‑Iran war levels.
“There was an expectation that we would cut rates this year. That’s not unreasonable in the context of a softening economy. That was off the table in March, and it’s off the table at the moment,” Bailey said at a European Central Bank conference in Sintra, Portugal.
Other panelists speaking alongside Bailey, including new Federal Reserve Chair Kevin Warsh expressed their opposition to giving “forward guidance” on their policy plans.
Most economists polled by Reuters expect, by a slim margin, that the BoE will leave rates unchanged this year, while financial markets see a roughly 75% chance of a single quarter-point rate hike, down from three rate hikes shortly after the conflict broke out.
Bailey repeated his view, given after the BoE kept rates on hold last month, that the BoE did not need to rush into making policy decisions and could wait for a time to see how a jump in oil prices – which is now receding – rippled through Britain’s economy.
Adding to the difficulty was getting a clear sense of how energy prices would develop, as futures prices for oil and gas failed to give a reliable guide, Bailey said.
“One (data point) that we’re wrestling with at the moment, and have wrestled with for years … is oil and gas futures prices. They are terrible indicators in history. The problem is that everything else is also a terrible indicator,” Bailey said, when asked to name his least-favourite piece of data.
(Reporting by Balazs Koranyi, writing by David Milliken, Editing by William Maclean)
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