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Bailey speech: Still some further journey down in rates to go
World FX news
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Bailey speech: Still some further journey down in rates to go
New
2025.09.24 23:08
2025.09.24 23:08
2025.09.24 23:08
In an interview with West Midlands Magazines' Editor, Simon Archer, Bank of England (BoE) Governor Andrew Bailey said that there is still some further journey down in interest rates to go.
"But exactly when that will be and how much it will be will depend on the path of inflation going down," Bailey added, while noting that there is some softening in the labor market, alongside cautiousness among consumers.
"People are being quite cautious at the moment. Of course, that affects spending, so that has an effect on the state of the economy because there isn't as much," he elaborated. "People aren't going out as much, they're not shopping as much, they're not going out to restaurants and so on as much that affects the overall state economy."
Market reaction
These comments received a dovish score of 3.0 from FXStreet BoE Speech Tracker.
Pound Sterling remains under bearish pressure following these remarks. At the time of press, GBP/USD was down 0.7% on the day at 1.3430.
BoE FAQs
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).
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.
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.
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.
Last updated
: 2025.09.24
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