Source: Sharecast
Speaking in an interview with The Times, Andrew Bailey said there had been "consistent" evidence that firms had been "adjusting employment" following April’s hike to employers’ National Insurance contributions.
This, he argued, would help bring down inflation, paving the way for further interest rate cuts.
The rate-setting Monetary Policy Committee, which Bailey chairs, has cut the cost of borrowing twice this year, each time by 25 basis points. Bank Rate now stands at 4.25%.
However, members have disagreed about the pace and size of cuts, with more dovish members such as Alan Taylor arguing more quicker and bigger cuts.
Bailey, in contrast, has long appeared more closely aligned with the market’s expectations for a steadily-paced four cuts this year.
He told The Times: "I really do believe the path is downward. I really do believe the path is downward but we continue to use the words ‘gradual and careful’ because…some people say to me, ‘why are you cutting when inflation’s above target?’"
But he continued: "If we saw the slack opening up much more quickly, that would lead us to a different conclusion."
Inflation currently stands at 3.4%, ahead of the BoE’s long-term 2% target, largely due to higher energy bills.
The MPC next meets on 7 August, and is currently expected to back another 25bps reduction.
The pound fell against the dollar on the back of Bailey’s comments, while odds on next month’s cut increased.