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Bank of England’s governor said on Wednesday that he became more concerned about the possibility of weakening demand in the British economy, which is a key reason that he believed the country was on the way to slowing inflation.
Although Boe predicted that the consumer price of inflation to accelerate to 3.7 percent this year, compared to 3 percent in January, Andrew Bailey told MPs to believe that the “fundamental path” of the price growth was still down.
He reduced the risk of self -decorating acceleration in the price growth given the “British Economy Form”, adding, “This is nothing like what we saw a few years ago.”
“The argument of demand weakness may become a little stronger than last year, but we will see,” Bailey said.
Boe reduced interest rates at 4.5 percent at its meeting in February, even when he warned that the growing prices of goods, including energy, were set to increase inflation in the coming months.
The main question facing the central bank is whether the recent weakness in the economy can primarily be attributed to the weak foreign supply of the economy or softening of demand, of which the last one could help the inflation to withdraw the lower.
In an interview with the Treasury Committee, Bailey emphasized the increasing risks that the UK is facing now because of the tariffs that have now imposed on their partners.
The direct impact on inflation was “ambiguous,” he said, but “the risks for the economy in the UK – and indeed the world economy are significant.”
Huw Pill, the chief economist of BOE, told the committee that it is difficult to assess the results of growing trade tensions on inflation, but said he would not support the faster pace of reduction of rates that were given current risks for inflation.
“I still don’t have much confidence that we have squeezed out all this,” he added.
