May 8, 2025 • 7 mins
Bank of England Governor Andrew Bailey comments after the central bank cut interest rates by a quarter-point following a divided vote that was more hawkish than expected. He is joined by Bloomberg's Francine Lacqua.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio News. You were surprisingly close
to a Holt. Can you explain that?
Speaker 2 (00:13):
Well, I wouldn't say Holt, I would say I was
much more balanced. Well, I was balanced going into it
from at the end of the last meeting, thinking well,
I'm really open minded for the next round and we'll
see what happens. So I think, you know, my mind
was certainly open at that point as to where we
(00:34):
would go next.
Speaker 1 (00:36):
But the decision could have gone to a hold this time.
So how should markets interpret that?
Speaker 2 (00:42):
Well, I think market shinterpted is we're in a situation
where there are risks on both sides of this situation.
There are a risk that demand could be considerably weaker
than we expect it to be. That could pull down
on inflation. We would then need to put lower interest
(01:03):
rates than we're predicting. There's the risk on the other
side that this process of adjustment was removal of the
sort of persistence of the fects from the inflation we
had for years ago isn't going to materialize in the
way we think it is, And also that the supply
capacity of the economy remains more limited. We don't get
(01:24):
the sort of supply growth that even that we're thinking
we're going to get and that will cause inflation to
be higher. Now, I we did it in two parts.
We started with the sort of domestic situation and then
sort of in the sense, brought the tariff and trade
news into it. On the domestic situation, this is sort
of crucial to your question about sort of you know,
(01:44):
how near or how far were you from action. An
important part of the story is actually where particularly where
the pay story is going in this country. Is it
going to you know, it's it's higher clearly than consistent
at the target. Is it going to come down during
the course of this year? Are we starting to see
(02:05):
the sort of the signals And my conclusion sort of
pouring over the evidence and the last few weeks as
we went into this decision, is I can see enough
in there. Yeah, that I think we are begining to
see in the sort of higher frequency data that we
are seeing some scientific coming off, even though in the
official slower frequency data, actually you don't really see so
much of that at the.
Speaker 1 (02:25):
Moment, Governor, I mean, Murgis are now almost ruling out
to move in June. Is that the right interpretation?
Speaker 2 (02:31):
I suppose The only thing we can say in confidences
in the world we're in at the moment is that
a lot's going to happen in the next whatever it
is six weeks or so. I mean, it really is
going to happen. I mean a lot really is going
to happen. I suspect, So I have to be honest
with you again. You know, I'm very open minded about
every meeting is by the way, every meetings live for us.
That's our philosophy. It's it's not a shifting philosophy, that's
(02:52):
a permanent philosophy. So I'm very open minded about it,
frankly because I think we'll know a lot. We'll know
a lot both domestically and internationally. Well, there are a
lot more about pay actually, because there's a peak of
pay settlements that we will know more about because we're
sort of just going through that, and I think we
can probably guarantee we're going to know more internationally. Stuff
will happen.
Speaker 1 (03:12):
How much uncertainty does the UK US trade deal actually
take off the table?
Speaker 2 (03:17):
Well, I think it's obviously good news now. However, the
UK is the very open economy, so when we formed
our view, it's not just about the UK US bilateral
trade relationship. It's about how all the other relationships with
the world come back to the UK as it were
in terms of the openness of the UK. So I
(03:39):
really hope, because I do think this is very good
news on the UK US front. I hope it's the
first of many, because that's really what we need to see.
Speaker 1 (03:47):
It is a trade deal with the EU. The bigger prize.
Speaker 2 (03:50):
Well, it's important. I think China's very important as well, frankly,
but those are important.
Speaker 1 (03:55):
Ones, Yes, which ones are more important US, China or UK?
You for the UN, I don't.
Speaker 2 (04:01):
Actually have a rank, order to be honest with you.
I think it's it's because of the sort of the
sort of other fluctuation nature of the situation. We do
not have a sort of you know, a league table
of importance in that sense.
Speaker 1 (04:17):
How big would the growth downgrade had been if not
for the looser financial conditions?
Speaker 2 (04:26):
Well, yeah, okay, it's a slightly hypopoctical question obviously, because
they did move. Obviously, our sort of taking a part
of the of the components would have suggested that the
impact of the world on growth next year and actually
is not a bad place to lock Actually would have
been about point three. I think something like that without
(04:47):
then and of offsetting effects of financial markets, and so.
Speaker 1 (04:51):
Again going forward, given all the uncertainty, do you you know,
what does it mean for cuts? How should market interpret
what we're seeing in you know, longer term?
Speaker 2 (05:04):
So I think the path is still gradually and carefully downwards.
I don't think that that path is done. A lot
will depend also, of course, on the say, on these
important domestic developments. But I'm not going to make predictions
about you know, how quickly how much, because there is say,
(05:25):
there is so much now in a sense that we're
going to learn in the next in the coming in
the coming time. But I do think the underlying path
is down as we are going to get a bit
of a bit of a bump up in inflation. I'm
afraid we know that it's going to be in the
next release because it's it's in these sort of so
called administered prices, which we already know. But our view
is it's not it's nothing like what we what we
(05:47):
saw a few years ago. And we do think in
the current situation, you know, it's reasonable to look through
that does.
Speaker 1 (05:55):
A terminal rate at three and a half percent sound reasonable.
Speaker 2 (05:59):
Well, again, I think judgments on the terminal rate and
conditions of uncertainty like this are frankly, you know, quite
quite heroic at times. Obviously the market makes those judgments.
Market has to make those judgments. Uh, you've seen the
profile that we've published today with inflation based on that
(06:19):
market profile, and it doesn't look an unreasonable one.
Speaker 1 (06:22):
Going forward to how concerned are you about the surgeon pound?
Does that have any impact on.
Speaker 2 (06:29):
How much the word surging is is quite dramatic because
Stirling has been a little bit sort of in the middle. Actually,
so you've had obviously we've obviously we've appreciated against the dollar,
but we've depreciated against some other currencies, so we've relative
to some others, we've been somewhat in the middle. Actually again, yeah,
we factor it into our our forecast. I think we
(06:51):
also have to look at it quite carefully as to
why is it searching? Because I'm not sure that just
apploying the usual theory of interest parity you know, tells
you all the story. In fact, it doesn't touch it
because our staff do a lot of work to sort
of pick the bones apart, and they'll tell you actually
that's not really, that's not really the story. So I
think it's more going on than just that story. So
(07:12):
again we have to look at you, what degree I
sort of risk Premiu coming into the into the market
in that sense,
Bloomberg Audio Studios, podcasts, radio News. You were surprisingly close
to a Holt. Can you explain that?
Speaker 2 (00:13):
Well, I wouldn't say Holt, I would say I was
much more balanced. Well, I was balanced going into it
from at the end of the last meeting, thinking well,
I'm really open minded for the next round and we'll
see what happens. So I think, you know, my mind
was certainly open at that point as to where we
(00:34):
would go next.
Speaker 1 (00:36):
But the decision could have gone to a hold this time.
So how should markets interpret that?
Speaker 2 (00:42):
Well, I think market shinterpted is we're in a situation
where there are risks on both sides of this situation.
There are a risk that demand could be considerably weaker
than we expect it to be. That could pull down
on inflation. We would then need to put lower interest
(01:03):
rates than we're predicting. There's the risk on the other
side that this process of adjustment was removal of the
sort of persistence of the fects from the inflation we
had for years ago isn't going to materialize in the
way we think it is, And also that the supply
capacity of the economy remains more limited. We don't get
(01:24):
the sort of supply growth that even that we're thinking
we're going to get and that will cause inflation to
be higher. Now, I we did it in two parts.
We started with the sort of domestic situation and then
sort of in the sense, brought the tariff and trade
news into it. On the domestic situation, this is sort
of crucial to your question about sort of you know,
(01:44):
how near or how far were you from action. An
important part of the story is actually where particularly where
the pay story is going in this country. Is it
going to you know, it's it's higher clearly than consistent
at the target. Is it going to come down during
the course of this year? Are we starting to see
(02:05):
the sort of the signals And my conclusion sort of
pouring over the evidence and the last few weeks as
we went into this decision, is I can see enough
in there. Yeah, that I think we are begining to
see in the sort of higher frequency data that we
are seeing some scientific coming off, even though in the
official slower frequency data, actually you don't really see so
much of that at the.
Speaker 1 (02:25):
Moment, Governor, I mean, Murgis are now almost ruling out
to move in June. Is that the right interpretation?
Speaker 2 (02:31):
I suppose The only thing we can say in confidences
in the world we're in at the moment is that
a lot's going to happen in the next whatever it
is six weeks or so. I mean, it really is
going to happen. I mean a lot really is going
to happen. I suspect, So I have to be honest
with you again. You know, I'm very open minded about
every meeting is by the way, every meetings live for us.
That's our philosophy. It's it's not a shifting philosophy, that's
(02:52):
a permanent philosophy. So I'm very open minded about it,
frankly because I think we'll know a lot. We'll know
a lot both domestically and internationally. Well, there are a
lot more about pay actually, because there's a peak of
pay settlements that we will know more about because we're
sort of just going through that, and I think we
can probably guarantee we're going to know more internationally. Stuff
will happen.
Speaker 1 (03:12):
How much uncertainty does the UK US trade deal actually
take off the table?
Speaker 2 (03:17):
Well, I think it's obviously good news now. However, the
UK is the very open economy, so when we formed
our view, it's not just about the UK US bilateral
trade relationship. It's about how all the other relationships with
the world come back to the UK as it were
in terms of the openness of the UK. So I
(03:39):
really hope, because I do think this is very good
news on the UK US front. I hope it's the
first of many, because that's really what we need to see.
Speaker 1 (03:47):
It is a trade deal with the EU. The bigger prize.
Speaker 2 (03:50):
Well, it's important. I think China's very important as well, frankly,
but those are important.
Speaker 1 (03:55):
Ones, Yes, which ones are more important US, China or UK?
You for the UN, I don't.
Speaker 2 (04:01):
Actually have a rank, order to be honest with you.
I think it's it's because of the sort of the
sort of other fluctuation nature of the situation. We do
not have a sort of you know, a league table
of importance in that sense.
Speaker 1 (04:17):
How big would the growth downgrade had been if not
for the looser financial conditions?
Speaker 2 (04:26):
Well, yeah, okay, it's a slightly hypopoctical question obviously, because
they did move. Obviously, our sort of taking a part
of the of the components would have suggested that the
impact of the world on growth next year and actually
is not a bad place to lock Actually would have
been about point three. I think something like that without
(04:47):
then and of offsetting effects of financial markets, and so.
Speaker 1 (04:51):
Again going forward, given all the uncertainty, do you you know,
what does it mean for cuts? How should market interpret
what we're seeing in you know, longer term?
Speaker 2 (05:04):
So I think the path is still gradually and carefully downwards.
I don't think that that path is done. A lot
will depend also, of course, on the say, on these
important domestic developments. But I'm not going to make predictions
about you know, how quickly how much, because there is say,
(05:25):
there is so much now in a sense that we're
going to learn in the next in the coming in
the coming time. But I do think the underlying path
is down as we are going to get a bit
of a bit of a bump up in inflation. I'm
afraid we know that it's going to be in the
next release because it's it's in these sort of so
called administered prices, which we already know. But our view
is it's not it's nothing like what we what we
(05:47):
saw a few years ago. And we do think in
the current situation, you know, it's reasonable to look through
that does.
Speaker 1 (05:55):
A terminal rate at three and a half percent sound reasonable.
Speaker 2 (05:59):
Well, again, I think judgments on the terminal rate and
conditions of uncertainty like this are frankly, you know, quite
quite heroic at times. Obviously the market makes those judgments.
Market has to make those judgments. Uh, you've seen the
profile that we've published today with inflation based on that
(06:19):
market profile, and it doesn't look an unreasonable one.
Speaker 1 (06:22):
Going forward to how concerned are you about the surgeon pound?
Does that have any impact on.
Speaker 2 (06:29):
How much the word surging is is quite dramatic because
Stirling has been a little bit sort of in the middle. Actually,
so you've had obviously we've obviously we've appreciated against the dollar,
but we've depreciated against some other currencies, so we've relative
to some others, we've been somewhat in the middle. Actually again, yeah,
we factor it into our our forecast. I think we
(06:51):
also have to look at it quite carefully as to
why is it searching? Because I'm not sure that just
apploying the usual theory of interest parity you know, tells
you all the story. In fact, it doesn't touch it
because our staff do a lot of work to sort
of pick the bones apart, and they'll tell you actually
that's not really, that's not really the story. So I
think it's more going on than just that story. So
(07:12):
again we have to look at you, what degree I
sort of risk Premiu coming into the into the market
in that sense,
Popular Podcasts
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
True Crime Tonight
If you eat, sleep, and breathe true crime, TRUE CRIME TONIGHT is serving up your nightly fix. Five nights a week, KT STUDIOS & iHEART RADIO invite listeners to pull up a seat for an unfiltered look at the biggest cases making headlines, celebrity scandals, and the trials everyone is watching. With a mix of expert analysis, hot takes, and listener call-ins, TRUE CRIME TONIGHT goes beyond the headlines to uncover the twists, turns, and unanswered questions that keep us all obsessed—because, at TRUE CRIME TONIGHT, there’s a seat for everyone. Whether breaking down crime scene forensics, scrutinizing serial killers, or debating the most binge-worthy true crime docs, True Crime Tonight is the fresh, fast-paced, and slightly addictive home for true crime lovers.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com