London Daily

Focus on the big picture.
Wednesday, Jan 28, 2026

Inflation to fall 'rapidly' - but worse interest rate pain yet to come, BoE governor warns

Inflation to fall 'rapidly' - but worse interest rate pain yet to come, BoE governor warns

Andrew Bailey is quizzed by Sky's economics and data editor Ed Conway after interest rates were increased for a record-breaking 12th successive time, lifting the cost of borrowing to 4.5% earlier on Thursday.
The governor of the Bank of England has told Sky News he expects inflation to fall "rapidly" in just weeks - but warned two thirds of the pain from interest rate rises is yet to come.

Andrew Bailey made the comments after interest rates were increased for a record-breaking 12th successive time, lifting the cost of borrowing to 4.5% earlier on Thursday.

The bank's Monetary Policy Committee also predicted there would be no recession this year, upgrading its economic growth forecasts by more than in any of its previous reports.

But when quizzed by Sky's economics and data editor Ed Conway on the impact on mortgages and how much interest rate-related pain was still to come to borrowers, Mr Bailey said: "We think, in terms of resetting and adjustments, about a third possibly has come through so far...

"There's quite a large proportion of mortgages yet to reset."

The governor said around 85% of mortgages in the UK are now on fixed rates, and that changes were taking longer to filter through to millions who are due to renew their mortgages this year.

But Mr Bailey said that falling energy prices and a more "resilient" economy meant inflation was likely to plummet when new figures are released later this month.

He said: "We do think that inflation is going to fall, quite rapidly... that doesn't happen until the April data which will come out in a couple of weeks' time."

'Utter, complete incompetence'

Meanwhile, Mr Bailey also appeared to rebuke the Bank's chief economist Huw Pill, who attracted criticism last month for saying Britons "need to accept" they are poorer.

When asked if he shared those views, the governor replied: "I think we have to be careful with the choice of words here," but said he accepted that national income had fallen.

He added: "I am very sensitive to [higher inflation]... because it's so concentrated in the essentials of life - energy, foods - that it affects those less well-off households more, because they have a bigger share of their consumption in those essentials."

Mr Bailey also said he "didn't agree" with accusations that the Bank was poor at forecasting, and said the pandemic and war in Ukraine were both huge global shocks that had major economic impacts and could not have been foreseen.

He added: "What has been particularly difficult is we've had this succession of big shocks with no gaps in between, and we've had to deal with those, and we've had to adapt policy as those shocks and their effects come along.

"We are firmly behind the view we have now, which is why we've changed rates today, our future actions will be driven by the evidence and the evidence will move on."

However, Professor Danny Blanchflower, a former member of the Bank of England's monetary policy committee, blasted the decision to raise rates.

He told Sky News: "The interest rate hikes haven't really done much and the effect is going to come down the road... it's going to have a big impact on the housing market and it's going to plunge the UK economy into recession.

"So they did have an alternative, they have no idea what they're doing, they shouldn't have been raising rates and it's going to hurt people because the consequences of raising rates are much worse than the cost of inflation. So this is utter, complete incompetence."

Professor Blanchflower predicted that "screeching U-turns are coming", and said the Bank should cut rates as soon as possible.

He said that, along with the pandemic and war in Ukraine, the UK has "one thing which people don't want to say, but it is Brexit" in explaining higher inflation.

"It has made it difficult to import food and difficult to get the price of food down... so price levels have remained higher than they have elsewhere," he added.
Newsletter

Related Articles

0:00
0:00
Close
Wall Street Bets on Strong US Growth and Currency Moves as Dollar Slips After Trump Comments
UK Prime Minister Traveled to China Using Temporary Phones and Laptops to Limit Espionage Risks
Google’s $68 Million Voice Assistant Settlement Exposes Incentives That Reward Over-Collection
Kim Kardashian Admits Faking Paparazzi Visit to Britney Spears for Fame in Early 2000s
UPS to Cut 30,000 More Jobs by 2026 Amid Shift to High-Margin Deliveries
France Plans to Replace Teams and Zoom Across Government With Homegrown Visio by 2027
Trump Removes Minneapolis Deportation Operation Commander After Fatal Shooting of Protester
Iran’s Elite Wealth Abroad and Sanctions Leakage: How Offshore Luxury Sustains Regime Resilience
U.S. Central Command Announces Regional Air Exercise as Iran Unveils Drone Carrier Footage
Four Arrested in Andhra Pradesh Over Alleged HIV-Contaminated Injection Attack on Doctor
Hot Drinks, Hidden Particles: How Disposable Cups Quietly Increase Microplastic Exposure
UK Banks Pledge £11 Billion Lending Package to Help Firms Expand Overseas
Suella Braverman Defects to Reform UK, Accusing Conservatives of Betrayal on Core Policies
Melania Trump Documentary Sees Limited Box Office Traction in UK Cinemas
Meta and EssilorLuxottica Ray-Ban Smart Glasses and the Non-Consensual Public Recording Economy
WhatsApp Develops New Meta AI Features to Enhance User Control
Germany Considers Gold Reserves Amidst Rising Tensions with the U.S.
Michael Schumacher Shows Significant Improvement in Health Status
Greenland’s NATO Stress Test: Coercion, Credibility, and the New Arctic Bargaining Game
Diego Garcia and the Chagos Dispute: When Decolonization Collides With Alliance Power
Trump Claims “Total” U.S. Access to Greenland as NATO Weighs Arctic Basing Rights and Deterrence
Air France and KLM Suspend Multiple Middle East Routes as Regional Tensions Disrupt Aviation
U.S. winter storm triggers 13,000-plus flight cancellations and 160,000 power outages
Poland delays euro adoption as Domański cites $1tn economy and zloty advantage
White House: Trump warns Canada of 100% tariff if Carney finalizes China trade deal
PLA opens CMC probe of Zhang Youxia, Liu Zhenli over Xi authority and discipline violations
ICE and DHS immigration raids in Minneapolis: the use-of-force accountability crisis in mass deportation enforcement
UK’s Starmer and Trump Agree on Urgent Need to Bolster Arctic Security
Starmer Breaks Diplomatic Restraint With Firm Rebuke of Trump, Seizing Chance to Advocate for Europe
UK Finance Minister Reeves to Join Starmer on China Visit to Bolster Trade and Economic Ties
Prince Harry Says Sacrifices of NATO Forces in Afghanistan Deserve ‘Respect’ After Trump Remarks
Barron Trump Emerges as Key Remote Witness in UK Assault and Rape Trial
Nigel Farage Attended Davos 2026 Using HP Trust Delegate Pass Linked to Sasan Ghandehari
Gold Jumps More Than 8% in a Week as the Dollar Slides Amid Greenland Tariff Dispute
BlackRock Executive Rick Rieder Emerges as Leading Contender to Succeed Jerome Powell as Fed Chair
Boston Dynamics Atlas humanoid robot and LG CLOiD home robot: the platform lock-in fight to control Physical AI
United States under President Donald Trump completes withdrawal from the World Health Organization: health sovereignty versus global outbreak early-warning access
FBI and U.S. prosecutors vs Ryan Wedding’s transnational cocaine-smuggling network: the fight over witness-killing and cross-border enforcement
Trump Administration’s Iran Military Buildup and Sanctions Campaign Puts Deterrence Credibility on the Line
Apple and OpenAI Chase Screenless AI Wearables as the Post-iPhone Interface Battle Heats Up
Tech Brief: AI Compute, Chips, and Platform Power Moves Driving Today’s Market Narrative
NATO’s Stress Test Under Trump: Alliance Credibility, Burden-Sharing, and the Fight Over Strategic Territory
OpenAI’s Money Problem: Explosive Growth, Even Faster Costs, and a Race to Stay Ahead
Trump Reverses Course and Criticises UK-Mauritius Chagos Islands Agreement
Elizabeth Hurley Tells UK Court of ‘Brutal’ Invasion of Privacy in Phone Hacking Case
UK Bond Yields Climb as Report Fuels Speculation Over Andy Burnham’s Return to Parliament
America’s Venezuela Oil Grip Meets China’s Demand: Market Power, Legal Shockwaves, and the New Rules of Energy Leverage
TikTok’s U.S. Escape Plan: National Security Firewall or Political Theater With a Price Tag?
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
×