The current rate is 4.25%, and it will be reconsidered at the next meeting on 7 August. Interest rates and millions of people across the UK are affected by interest rates, which set the trend for mortgage, credit card, and savings rates.
Bailey said the UK's economic growth was coming short of its full potential – leaving slack in the economy which can be used to lower the inflation rate. He also noted that some businesses are starting to adjust by cutting working hours and shrinking their workforce.
Pay rises have also been eroded, particularly since Chancellor Rachel Reeves raised employers' national insurance contributions from 13.8% to 15% in April. This move will net another £25 billion a year for the Government.
U.K. Job Vacancies Fall to Lowest Level Since 2021
The latest employment figures reveal that there are now nearly 736,000 job vacancies in the UK during the three months to May. It's the lowest since late 2021, when companies scaled back hiring in the face of the COVID pandemic.
Combined with fewer jobs being available, the number of people hunting for new employment has surged at the fastest rate posted since the onset of the pandemic, according to a survey by KPMG and the Recruitment and Employment Confederation.
"The road, I believe, is down. I do believe the path is down," but he also emphasized that decisions will be "gradual and cautious." He also said he understood the concerns of people who have been asking why the RBA would consider rate cuts when inflation is above target, but said the weak economy justifies the case for easier monetary policy.
Investment specialists, including Louise Dudley at Federated Hermes, suggested that Bailey's comments point to a rate cut "sooner rather than later".
U.K. Economy Contracts Again Ahead of Key Decision
Interest rates were held steady in June following two earlier cuts this year by the Bank of England. Rate direction at the last meeting – Bailey also said rate direction would involve a "gradual downward path".
Economic data from the Office for National Statistics showed the UK economy shrank in May by 0.1% month-on-month, building on a drop the previous month in April.
The cooling was primarily because of softer manufacturing output and disappointing retail sales. And this economic stress is likely to cast a long shadow over the Bank's next interest rate decision in August.
