London Daily

Focus on the big picture.
Tuesday, Apr 07, 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
King Charles Faces Criticism From Some UK Christians Over Absence of Easter Message
Former UK Defence Secretary Raises Concerns Over Ability to Counter Iran Missile Threat
UK Signals Non-Involvement in Iran Conflict as Trump Reasserts Firm Deterrence Stance
US and UK Strengthen Medical Device Cooperation Following Tariff Removal
Trump Backs Steve Hilton for California Governor, Highlighting Reform Agenda
UK Seeks Closer Ties With Anthropic as AI Policy Divergence Emerges Across Atlantic
Experts Warn of Evolving Extremism After Teens Arrested in UK Ambulance Arson Case
UK Convenes Talks to Safeguard Shipping Through Strait of Hormuz After Conflict Escalation
Trump Highlights Strong Leadership in Critique of UK Stance on Iran
UK Authorities Review Kanye West’s Entry Status Following Festival Backlash
UK Considers Deploying Aircraft Carrier for US Independence Day Celebrations Amid Renewed Transatlantic Focus
United Kingdom Moves to Attract AI Firm Anthropic Amid Tensions with US Defense Officials
RAF Intercepts Iranian Drones in Middle East to Defend Allied Security Interests
Labour Signals Shift on Foie Gras and Fur Restrictions to Advance EU Trade Talks
Seven Arrested Near RAF Base as UK Authorities Respond to Protest Activity
Economic Pressures Mount as Analysts Warn UK Growth Is Being Constrained by Policy Burdens
UK Green Party’s Push for Church-State Separation Sparks Debate Over National Identity
Strategic Island Emerges as Growing Challenge for United States and United Kingdom Defense Planning
Pepsi Pulls Sponsorship from UK Festival Following Backlash Linked to Kanye West
Signs Emerge of Declining Enthusiasm for Social Media in the United Kingdom
Security Alert Raised Ahead of Meghan Markle’s Planned Visit to Australia
UK Food Halls Defy Hospitality Slowdown, Emerging as Bright Spot in Challenging Market
UK Sets Firm Conditions for Military Action, Insisting on Legal Mandate and Clear Strategy
UK Medicines Regulator Launches Probe into Peptide Clinics Over Health Claims
New North Sea Drilling Unlikely to Significantly Cut UK Gas Imports, Analysis Finds
Woman Linked to UK’s First All-Female Terror Plot Faces Deportation
Downed US Aircraft Over Iran Linked to Operations from UK Airfield
Two Men and Teen Detained in UK Following Attack on Jewish Charity Ambulance
UK Police Launch Inquiry After Firearms Left Unattended Outside Mayor’s Residence
Giuffre Family Calls on King Charles to Meet Epstein Survivors During US Visit
Amber Wind Warning Issued as Storm Dave Approaches Parts of the United Kingdom
Prince Harry and Meghan’s Australia Visit Set to Draw Heightened Global Attention
UK Considers Entry Fees for Overseas Visitors at Major Museums Ahead of 2026 Travel Season
UK Prime Minister and Kuwait Crown Prince Coordinate Security Response After Regional Escalation
Calls Grow to Expand Fully Paid Maternity Leave for UK Teachers Amid Workforce Pressures
UK Secures Tariff-Free Access to US Market in Landmark Pharmaceuticals Agreement
Trump Projects Strength in Critique of UK Leadership and Naval Readiness
UK FinTech Setback as VibePay and Smartlayer Cease Operations Amid Funding Pressures
UK Leads Global Coalition of Over Forty Nations to Address Strait of Hormuz Crisis
UK Firms Urged to Accelerate Preparation as New Sustainability Reporting Rules Take Shape
UK Moves Rapid Sentry Air Defence System to Kuwait After Drone Strike Escalation
Transatlantic Relations Tested as UK Seeks Balance While Trump Reshapes Strategic Approach
Trump’s Strategic Pressure on UK Seen as Push for Stronger Alignment and Fairer Terms
UK Focuses on Trade Finance to Secure Critical Materials for Defence and Energy Sectors
Majority of UK Businesses Hit by Middle East Conflict While Confidence Holds Firm
UK Royal Navy Faces Renewed Scrutiny as Debate Intensifies Over Capability and Readiness
Reform UK Faces Mounting Distractions as Policy Agenda Struggles to Gain Traction
Investigation Launched Into Northern Cyprus IVF Clinics After UK Families Receive Incorrect Sperm
International Meeting Issues Unified Call to Safeguard Navigation Through Strait of Hormuz
Potential Strait of Hormuz Closure Raises Concerns Over UK Food and Medicine Supply Chains
×