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The Bank of England (BoE) is set to maintain a tighter grip on interest rates for longer as the battle against inflation rumbles. Price pressures across the economy are proving more enduring than anticipated, Deputy Governor Clare Lombardelli told lawmakers on Wednesday.  Her comments indicated that the bank has little room to reduce borrowing costs further without risking another spike in inflation. Lombardelli’s remarks were echoed by Governor Andrew Bailey, who also reiterated that the central bank is not expected to soon follow up with another cut this year. He said financial markets had “got” the bank’s warning that the cuts would now be slower than many had hoped. The warning marks a sharp change of tone from just weeks ago, when the bank cut its base rate to 4.0% in August, at the end of a difficult 5-4 split vote on the Monetary Policy Committee (MPC). The cut was intended to bolster business activity amid signs that the economy’s growth and hiring were slowing. But inflation data has since surprised to the upside, which has caused policymakers to snap to attention. Instead of following through on standard quarterly cuts, as investors anticipated earlier this summer, the BoE indicates that rates may not rise from their current level until deep into 2026. The shift underscores the central bank’s predicament: While inflation has plummeted from the double digits in 2022, it remains above the target and shows signs of sticking, especially in sectors like food, energy, and services. Markets adjust to slower cuts Speaking to Parliament’s Treasury Committee, Gov. Bailey claimed his “message has landed” in financial markets. He reiterated that the path for rates remained lower but would be gradual. Bailey has told MPs there is now much greater uncertainty about how far and fast the Bank might go next.…

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Filed under: News - @ September 4, 2025 12:27 am