London Daily

Focus on the big picture.
Sunday, Mar 15, 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
Starmer and Trump Discuss Urgent Need to Reopen Strait of Hormuz Amid Escalating Iran Conflict
Prince Harry and Meghan Markle’s Planned Australia Visit Draws Mixed Reaction From Local Communities
Trump Calls on France and UK to Help Safeguard Strait of Hormuz Shipping Route
Boris Johnson Labels Bitcoin a ‘Ponzi Scheme’, Sparking Debate in Crypto World
UK Considers Targeted Aid for Vulnerable Households as Energy Costs Rise
Stellantis Urges Immediate Review of UK Electric Vehicle Sales Targets
Home Office Reverses Course to Allow Some Dual Nationals to Enter UK Using EU Passports
Reform UK Proposes Replacing Top Civil Servants With Officials Aligned to Government Agenda
Netflix Adds Critically Acclaimed ‘Best Film of 2025’ With Perfect Rotten Tomatoes Score
‘The Sums Don’t Add Up’: UK Farmers Hit by Soaring Costs as Iran War Disrupts Global Supplies
Confidential UK Biobank Health Records Found Online After Researchers Accidentally Expose Data
Trump Urges Britain and Allies to Deploy Warships to Safeguard Strait of Hormuz
Trump Urges Britain and Allies to Deploy Warships to Safeguard Strait of Hormuz
Middle East War Highlights Strategic Importance of Strong UK–Ireland Cooperation
Weak Growth Signals UK Economy Was Faltering Even Before Middle East Energy Shock
Marks & Spencer Tops UK Fashion Retail Rankings as Most Considered Brand
United States Launches Trade Investigation Into Allies Over Forced Labour Practices
United States Launches Trade Investigation Into Allies Over Forced Labour Practices
Russia Accuses Britain Over Storm Shadow Strike as London Reaffirms Ukraine’s Right to Self-Defence
Russia Accuses Britain Over Storm Shadow Strike as London Reaffirms Ukraine’s Right to Self-Defence
Royal Navy to Acquire Twenty Uncrewed Surface Vessels for Autonomous Warfare Testing
Russia Summons British and French Envoys After Ukrainian Storm Shadow Strike on Strategic Facility
Starmer Confirms Britain Will Maintain Sanctions on Russia Despite U.S. Policy Shift
UK Moves to Refine AI Definition in Investment Security Reform
UK Economy Stalls in January as Growth Unexpectedly Falls to Zero
Asian Energy Security Tested as Strait of Hormuz Disruption Threatens Oil Supplies
Iran Sets Three Conditions for Ending Regional War as Diplomatic Efforts Intensify
Tesla Secures Approval to Supply Electricity Directly to Homes Across Britain
Prince William Delivers Tribute to Australia’s Naval Alliance Amid Renewed Royal Spotlight on the Country
UK Foreign Secretary Travels to Saudi Arabia to Reinforce Support for Regional Allies
Putin’s ‘Hidden Hand’ May Be Assisting Iran in Conflict With Trump, UK Defence Secretary Warns
UK Sets April Deadline for Tech Platforms to Strengthen Online Protections for Children
Elon Musk Moves Into Britain’s Energy Market as Tesla Wins Licence to Supply Power
UK Watchdog Warns Fuel Retailers Against Profiteering Amid Iran War Price Surge
Report Claims Iran Used UK Charity Network to Expand Influence
United States and United Kingdom Establish Joint Standards for Counter-Drone Technology
Iran May Be Laying Naval Mines in Strait of Hormuz, UK Warns Amid Escalating Gulf Tensions
US Deploys Bunker-Buster Bombs to UK Airbase as Iran Conflict Intensifies
British Troops in Iraq Intercept Iranian Drones Targeting Coalition Base
Release of Mandelson Files Raises Tensions as UK Seeks Stable Relations With Donald Trump
UK Documents Reveal Starmer Was Warned About Mandelson’s Epstein Links Before Ambassador Appointment
Nearly Five Hundred UK Mortgage Deals Withdrawn in Two Days as Market Volatility Forces Lenders to Reprice
Three Cargo Ships Hit Near Iran as Attacks Spread to Strategic Strait of Hormuz
Why British Police Repeatedly Declined to Investigate Jeffrey Epstein’s UK Links
UK Parliament Ends Hereditary Seats in House of Lords, Closing Chapter on Centuries of Aristocratic Lawmaking
EU and UK Urge Israel to Act Against Rising West Bank Settler Violence Amid Regional Tensions
US Senator John Kennedy Says Keir Starmer Should Not Be Trusted for Military Advice Amid Iran War Debate
UK High Court Rejects Attempt to Revive Terrorism Charge Against Kneecap Rapper
Revolut Secures Full UK Banking Licence After Multi-Year Regulatory Wait
Kentucky’s Bench Boost Powers Wildcats Past LSU in SEC Tournament Opener
×