Bank boss tells BBC he won’t rush interest rate rises

UK Central Bank Cautious on Interest Rate Adjustments Amid Global Energy Crisis

Andrew Bailey, governor of the Bank of England, told the BBC that the UK’s central bank will not hasten decisions to raise interest rates, even as the world contends with a significant energy crisis. During a discussion at the International Monetary Fund (IMF) meeting in Washington, he noted that higher oil and gas prices would inevitably influence inflation but acknowledged that other variables complicate the rate decision ahead of the next review on 30 April.

IMF Advises Against Hasty Rate Hikes

The IMF issued a cautionary statement on Wednesday, urging central banks to avoid accelerating increases in borrowing costs after the Middle East conflict. Bailey highlighted that the Bank of England is considering the IMF’s “serious advice,” emphasizing the need for careful evaluation amid evolving economic conditions.

“There’s really difficult judgments to be made,” Bailey said. “We’re not going to rush to judgments on those things, because there are a lot of uncertainties around this, not just how it’s going to play out, but also how it’s going to pass through into the UK economy.”

Before the US-Israeli strikes on Iran six weeks ago, market expectations leaned toward rate cuts for the year. However, the risk of elevated prices due to climbing energy costs has shifted speculation toward maintaining current rates or even raising them. Central banks typically increase rates to curb demand when inflation spikes, yet they lower them to stimulate borrowing if economic activity slows.

Higher energy prices could simultaneously drive up inflation and stifle growth, complicating the Bank’s role. Bailey pointed out that the UK’s “strong dependency on gas” as an energy source amplifies the impact of global price fluctuations. “The real determinant here is the duration of [the conflict],” he explained. “The faster there is a resolution to this situation—particularly in terms of energy supply from the Gulf—the easier and better the outcome will be.”

Government Stance on Iran Conflict

UK Chancellor Rachel Reeves criticized the war on Iran during a media interview at the IMF event, citing its effects on rising prices and economic growth. Meanwhile, US Treasury Secretary Scott Bessent argued that a “small bit of economic pain” is justified for long-term international security, warning of Iran’s potential nuclear threat to the UK. A government spokesperson clarified: “There is no assessment that Iran is targeting Europe with missiles.”

“It’s really too early to form strong judgments on that,” Bailey added, underscoring the Bank’s ongoing wait for “meaningful data” on how the conflict is affecting the UK economy, prices, and activity.

The IMF also warned that the US-Israeli conflict with Iran could trigger a global recession, with the UK likely to suffer the most among major economies. Bailey’s cautious approach reflects the balance between mitigating inflation risks and safeguarding economic stability in the face of unpredictable geopolitical developments.