Bailey Speech: BoE Governor speaks on interest rate outlook after extending the pause


Bank of England (BoE) Governor Andrew Bailey is addressing the press conference following the publication of the Monetary Policy Report (MPR), responding to media questions.

At its February monetary policy meeting, the Bank of England (BoE) decided to keep the policy rate steady at 5.25% for a fourth meeting in a row. 

Follow our live coverage of the BOE policy announcements and the market reaction.

BoE press conference key quotes

"We are not yet at a point where we can lower rates."

"Level of bank rate remains appropriate."

"We need to keep policy sufficiently restrictive for sufficiently long, nothing more, nothing less."

"On how long policy needs to be restrictive, BoE's Bailey says depends on incoming data."

"Continuation of trade disruptions are upside risk to inflation projection."

"About two-thirds of peak impact from higher rates on economy has now come through, up from about half in Nov."

“For me key question has moved from 'how restrictive do we need to be?' to 'how long do we need to maintain this stance for?”

“Will not speculate on what we will do at the next meeting.”

“Good news on economy has taken away need for warning that rates could rise again.”

“Don't agree with idea that we've done easy bit on bringing wage growth down.”

“We don't need to see inflation back at target to cut rates, we need evidence that it is heading there.”

BoE FAQs

What does the Bank of England do and how does it impact the Pound?

The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).

How does the Bank of England’s monetary policy influence Sterling?

When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.

What is Quantitative Easing (QE) and how does it affect the Pound?

In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.

What is Quantitative tightening (QT) and how does it affect the Pound Sterling?

Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.


This section below was published at 12:00 GMT to cover the Bank of England's monetary policy announcements and the initial market reaction.

The Bank of England (BoE) announced on Thursday that it maintained the policy rate at 5.25% following its February policy meeting. The decision came in line with the market expectations.

The BoE Monetary Policy Committee (MPC) voted 6-3 in favor of the decision. Policymakers Haskel and Mann voted to raise rates by 25 basis points (bps). Policymaker Dhingra voted to cut rates by 25 bps.

In the policy statement, the BoE said that they “need more evidence that CPI will fall all the way to 2% and stay there before cutting rates, adding that the MPC "will keep under review for how long bank rate should be maintained at its current level.”

Key takeaways from BoE Monetary Policy Report

CPI returning to 2% target in Q2 2024 (Nov forecast: Q4 2025), based on market interest rates and modal forecast.

BoE says CPI expected to rise back above 2% target in Q3 2024, not at target again until Q4 2026, based on market rate expectations.

Market rates imply more BoE loosening than Nov, show bank rate at 4.2% in Q4 2024, 3.4% in Q4 2025, 3.2% in Q4 2026 (Nov assumption: 5.1% in Q4 2024, 4.5% in Q4 2025, 4.2% in Q4 2026).

BoE forecast shows CPI in one year's time at 2.8% (Nov forecast: 3.1%), based on market interest rates and modal forecast.

BoE forecast shows CPI in two years' time at 2.3% (Nov forecast: 1.9%), based on market interest rates.

BoE estimates GDP "broadly flat" in Q4 2023 (dec forecast: "broadly flat"), sees "broadly flat" GDP over coming Quarters

BoE forecast shows CPI in three years' time at 1.9% (Nov forecast: 1.5%), based on market interest rates

BoE forecasts GDP in 2024 +0.25% (Nov: 0%), 2025 +0.75% (Nov: +0.25%), 2026 +1% (Nov: 0.75%), based on market rates

BoE forecasts real post-tax household income in 2024 +0.5% (Nov: +0.25%), 2025 +0.25% (Nov: +0.25%), 2026 0% (Nov: +0.5%).

BoE forecasts unemployment rate in Q4 2024 4.6% (Nov: 4.7%); Q4 2025 4.9% (Nov: 5.0%); Q4 2026 5.0% (Nov: 5.1%).

BoE estimates wage growth +4% yy in Q4 2024 (Nov: +4.25%), Q4 2025 +2.75% (Nov: +2.75%); Q4 2026 1.75% (Nov: +2%).

BoE estimates Nov fiscal measures add 0.2% to real GDP in 2024/25 and 2025/26, 0.3% in 2026/27; impact on inflation is less.

BoE agents' survey of businesses suggests average pay settlements to fall to 5.4% in 2024 from around 6% in 2023.

BoE estimates jan services CPI to rise to 6.6% before falling towards 5% in q2 2024.

BoE forecasts food prices will be broadly flat, new post-brexit border checks expected to have only a small impact on food price inflation.

BoE says medium term equilibrium level of unemployment is around 4.5%, long-term rate remains just above 4%.

BoE says potential supply growth seen at 1.25% a year by 2025 and 2026, up slightly from Nov estimate.

BoE sees zero excess demand in uk economy, down from peak of 1.75% at start of 2022.

Key takeaways from BoE policy statement

BoE no longer says "further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures."

BoE says MPC will ensure that bank rate is "restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term."

BoE sees upward risks to CPI from geopolitical factors including red sea, domestic price and wage risks now "more evenly balanced."

Market reaction to BoE policy announcements

The Pound Sterling caught a fresh bid in a knee-jerk reaction to the BoE verdict. At the time of writing, the pair is down 0.21% on the day at 1.2655.

Pound Sterling price today

The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies today. Pound Sterling was the weakest against the Euro.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.13% -0.01% 0.09% 0.61% 0.03% 0.33% 0.11%
EUR 0.13%   0.12% 0.19% 0.74% 0.19% 0.47% 0.22%
GBP 0.02% -0.12%   0.07% 0.63% 0.08% 0.34% 0.12%
CAD -0.08% -0.19% -0.07%   0.56% 0.00% 0.27% 0.07%
AUD -0.61% -0.75% -0.63% -0.54%   -0.57% -0.29% -0.49%
JPY -0.05% -0.18% -0.07% -0.01% 0.56%   0.25% 0.03%
NZD -0.35% -0.45% -0.33% -0.25% 0.28% -0.30%   -0.23%
CHF -0.11% -0.22% -0.12% -0.03% 0.51% -0.06% 0.21%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).


This section below was published as a preview of the Bank of England's monetary policy announcements at 06:00 GMT.

  • The UK central bank is likely to extend the pause on “Super Thursday,” in its first meeting of 2024.
  • The Bank of England could hold its restrictive bias, pushing back against early rate-cut bets.
  • BoE Governor Bailey’s words and updated forecasts set to inject volatility in the Pound Sterling.

The Bank of England (BoE) is set to hold its policy rate for a fourth meeting in a row on “Super Thursday.” It will be the United Kingdom (UK) central bank’s first policy meeting of 2024, and it is expected to set the direction for the Pound Sterling (GBP) market in the months to come.

Follow our Live Coverage here

Bank of England to hold fire as Bailey takes center stage

The Bank of England is expected to leave the benchmark interest rate unchanged at 5.25% following its policy meeting on Thursday at 12:00 GMT. It’s a so-called “Super Thursday” as the policy announcements will be accompanied by the Monetary Policy Report (MPR) and followed by Governor Andrew Bailey’s press conference at 12:30 GMT.

Markets are currently pricing in about 100 basis points (bps) of rate cuts this year, beginning in the second quarter.

The BoE is seen maintaining its restrictive stance, affirming the narrative of “higher interest rates for longer” while resisting the market’s expectation of early rate cuts. A surprise uptick in the headline annual inflation for December, escalating Middle East geopolitical tensions and the impending impact of higher borrowing costs could dissuade policymakers from leaning in favor of a dovish policy pivot, as yet.  

While testifying before the UK Treasury Select Committee (TSC) in early January, BoE Governor Andrew Bailey said “as best as we can tell from the monitoring, we have seen that shipping traffic is being affected and rerouted. That will increase shipping prices and costs. Initially, that will be an issue in the monetary policy world and then may feed through into the financial stability world.”

Meanwhile, BoE Deputy Governor Sarah Breeden said following the December policy meeting that “it's important for the monetary policy to be restrictive for an extended period.”

Heading into the BoE’s “Super Thursday”, the UK annual inflation stands at 4.0%, having rebounded from November’s more-than-two-year low of 3.9%. Britain's Gross Domestic Product (GDP) expanded by 0.3% in November after October’s 0.3% decline. Meanwhile, the S&P Global UK Preliminary Services PMI surged to an eight-month high of 53.80 in January from 53.40 in December. Recent data reaffirms a continued bounce in the UK economic activity, allowing the BoE to keep the borrowing costs higher for a longer period.  

The focus, however, will also be on the central bank’s updated inflation and growth forecasts, as well as Bailey’s press conference, for fresh insights on the timing of the BoE’s policy pivot. In its November MPR, the BoE Monetary Policy Committee (MPC) said it expected GDP growth to be "broadly flat" in the fourth quarter of 2023 and over coming quarters. It was most likely CPI inflation would return to the 2% target by 2025, the report said.

Previewing the BoE events, analysts at Goldman Sachs noted, "We expect the growth projections in 2025 and 2026 to be revised up. The BoE will revise down its near-term inflation forecasts because of softer consumption data and lower energy prices, with 2% CPI hit by the end of this year - and this may allow for rates to be cut by the spring.”

"We continue to expect the first 25bps cut in May, followed by 25 bps cuts every meeting until Bank Rate reaches 3.0% in May 2025. An earlier cut in March cannot be ruled out entirely, especially if the disinflation process is coupled with further deterioration in growth," the analysts added.

How will the BoE interest rate decision impact the GBP/USD?

If the Bank of England adopts a dovish stance, in the face of downward revisions to the inflation and growth outlook, the odds for a May rate cut would spike and smash the Pound Sterling across the board. A dovish vote split could also add to the bearish bias in the GBP/USD pair. On the other hand, the pair could see a solid recovery rally should the BoE maintain its hawkish rhetoric.   

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “Having failed to resist above the critical 21-day Simple Moving Average (SMA) at 1.2705, GBP/USD is testing the 50-day SMA support at 1.2677. The 14-day Relative Strength Index (RSI) has breached the midline for the downside, suggesting a negative near-term outlook for the major.”

Dhwani also outlines important technical levels to trade the GBP/USD pair: “Strong support aligns at the January 17 low of 1.2595, below which a drop toward the 200-day SMA at 1.2562 cannot be ruled out. Deeper declines will open floors for a test of the 100-day SMA at 1.2467. On the upside, Pound Sterling buyers need to recapture the 21-day SMA at 1.2705 on a sustained basis for meaningful bullish traction toward the previous week’s high of 1.2775. The next upside barrier is envisioned at the 1.2800 round level.”

Economic Indicator

United Kingdom BoE's Governor Bailey speech

Andrew Bailey is the Bank of England's Governor. He took office on March 16th, 2020, at the end of Mark Carney's term. Bailey was serving as the Chief Executive of the Financial Conduct Authority before being designated. This British central banker was also the Deputy Governor of the Bank of England from April 2013 to July 2016 and the Chief Cashier of the Bank of England from January 2004 until April 2011.

Read more.

Next release: 02/01/2024 12:30:00 GMT

Frequency: Irregular

Source: Bank of England

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