London Daily

Focus on the big picture.
Friday, Aug 22, 2025

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
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
New York Appeals Court Voids Nearly $500 Million Civil Fraud Penalty Against Trump While Upholding Fraud Liability
Elon Musk tweeted, “Europe is dying”
Far-Right Activist Convicted of Incitement Changes Gender and Demands: "Send Me to a Women’s Prison" | The Storm in Germany
Hungary Criticizes Ukraine: "Violating Our Sovereignty"
Will this be the first country to return to negative interest rates?
Child-free hotels spark controversy
North Korea is where this 95-year-old wants to die. South Korea won’t let him go. Is this our ally or a human rights enemy?
Hong Kong Launches Regulatory Regime and Trials for HKD-Backed Stablecoins
China rehearses September 3 Victory Day parade as imagery points to ‘loyal wingman’ FH-97 family presence
Trump Called Viktor Orbán: "Why Are You Using the Veto"
Horror in the Skies: Plane Engine Exploded, Passengers Sent Farewell Messages
MSNBC Rebrands as MS NOW Amid Comcast’s Cable Spin-Off
AI in Policing: Draft One Helps Speed Up Reports but Raises Legal and Ethical Concerns
Shame in Norway: Crown Princess’s Son Accused of Four Rapes
Apple Begins Simultaneous iPhone 17 Production in India and China
A Robot to Give Birth: The Chinese Announcement That Shakes the World
Finnish MP Dies by Suicide in Parliament Building
Outrage in the Tennis World After Jannik Sinner’s Withdrawal Storm
William and Kate Are Moving House – and the New Neighbors Were Evicted
Class Action Lawsuit Against Volkswagen: Steering Wheel Switches Cause Accidents
Taylor Swift on the Way to the Super Bowl? All the Clues Stirring Up Fans
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Apple Expands Social Media Presence in China With RedNote Account Ahead of iPhone 17 Launch
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Cambridge Dictionary Adds 'Skibidi,' 'Delulu,' and 'Tradwife' Amid Surge of Online Slang
Bill Barr Testifies No Evidence Implicated Trump in Epstein Case; DOJ Set to Release Records
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
The CEO Who Replaced 80% of Employees for the AI Revolution: "I Would Do It Again"
Emails Worth Billions: How Airlines Generate Huge Profits
Character.ai Bets on Future of AI Companionship
China Ramps Up Tax Crackdown on Overseas Investments
Japanese Office Furniture Maker Expands into Bomb Shelter Market
Intel Shares Surge on Possible U.S. Government Investment
Hurricane Erin Threatens U.S. East Coast with Dangerous Surf
EU Blocks Trade Statement Over Digital Rule Dispute
EU Sends Record Aid as Spain Battles Wildfires
JPMorgan Plans New Canary Wharf Tower
Zelenskyy and his allies say they will press Trump on security guarantees
Beijing is moving into gold and other assets, diversifying away from the dollar
Escalating Clashes in Serbia as Anti-Government Protests Spread Nationwide
The Drought in Britain and the Strange Request from the Government to Delete Old Emails
Category 5 Hurricane in the Caribbean: 'Catastrophic Storm' with Winds of 255 km/h
"No, Thanks": The Mathematical Genius Who Turned Down 1.5 Billion Dollars from Zuckerberg
The surprising hero, the ugly incident, and the criticism despite victory: "Liverpool’s defense exposed in full"
Digital Humans Move Beyond Sci-Fi: From Virtual DJs to AI Customer Agents
YouTube will start using AI to guess your age. If it’s wrong, you’ll have to prove it
Jellyfish Swarm Triggers Shutdown at Gravelines Nuclear Power Station in Northern France
×