Inflation “past its peak” says BoE governor

It followed the decision from Threadneedle Street to increase bank rates by 0.5%, pushing them up to 3.5% and comes in a week which has also seen the European Central Bank (ECB) and the Federal Reserve also increased interest rates by 0.5%. 

It also comes just days after the Office of National Statistics published its latest inflation figures, reporting that both Consumer Price Index (CPI) and Consumer Price Index including owner occupiers’ housing costs (CPIH) dropping. CPI slipped from 11.1% to 10.7% in the 12 months to November 2022, while CPIH dropped from 9.6% to 9.3% during the same period.  

In an interview with Sky News, Bailey said these figures gave the first potential glimmer that it may begin to come down. He explained: “We think we’ve possibly seen the first glimmer, with the figure released this week, that it’s not only beginning to come down but it was a little bit below where we thought it would be. 

“That’s obviously very good news, but there’s a long way to go.” 

He also outlined that inflation is likely to fall more sharply next year. Bailey said: “We expect inflation to start falling more rapidly, probably from the late spring onwards.” 

He added: “But there is a risk it won’t happen in that way, particularly because the labour market and the labour supply in this country is so tight.”  

Giving its reasoning for raising rates, the ECB’s president Christine Lagarde said she expects to have to raise rates “significantly further” as inflation “remains far too high” and is projected to stay above the two percent target.