London Daily

Focus on the big picture.
Saturday, Apr 04, 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
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
UK Leads Coalition of Over Forty Nations Urging Iran to Reopen Strait of Hormuz
UK Secures Tariff-Free Access for Medicines in Landmark US Pharma Trade Agreement
King Charles III Invited to Address Joint Session of U.S. Congress in Rare Diplomatic Honor
Debate Grows Over Whether Expanded North Sea Drilling Can Reduce UK Energy Bills
UK Faces Heightened Risk of Jet Fuel Shortages, Airline Chief Warns
UK Ends Police Investigations into Lawful Social Media Posts After Review Finds Overreach
Abramovich Moves to Establish Charity for Frozen Chelsea Sale Proceeds Amid UK Dispute
Starmer Reaffirms NATO Commitment While Responding to Trump’s Strategic Critique
UK Aid Reductions Raise Fears of Severe Human Impact Across Parts of Africa
UK Signals Renewed Push for EU Cooperation as Iran Conflict Reshapes Security Landscape
Bank of England Signals Caution as Bailey Advises Markets Against Expecting Rate Hikes
UK to Convene Global Coalition to Restore Shipping Through Strait of Hormuz
Trump Signals Possible NATO Reassessment, Emphasizes Stronger U.S. Strategic Autonomy
Australia Joins British-Led Efforts to Reopen Strait of Hormuz Amid Escalating Tensions
King Charles Plans US State Visit as UK Strengthens Ties with Trump Leadership
UK Regulator Launches Investigation Into Microsoft’s Business Software Practices
Kanye West Set for High-Profile Return to UK Stage at Wireless Festival
Trump Presses Europe to Strengthen Commitment as Iran Conflict Escalates
UK to Deploy Additional Troops to Middle East Amid Rising Regional Tensions
UK Authorities Face Claims of Heavy-Handed Measures in Monitoring Released Pro-Palestine Activists
Trump Calls on UK to Secure Its Own Energy as Iran Conflict Intensifies
Nigel Farage Declines Invitation to UK Conservative Conference Led by Liz Truss
Trump Warns Allies to Take Responsibility as Rift Deepens with UK and France Over Iran Conflict
How Britain’s Prime Minister Controls U.S. Bomber Access in Escalating Iran Conflict
Trump Urges Allies to Secure Their Own Oil Supplies as Hormuz Crisis Disrupts Global Energy
Russia Expels British Diplomat as UK Pushes Back Against Pressure
White House App Faces Scrutiny After Claims of Continuous User Location Tracking
BBC Faces Scrutiny Over Allegations of Paid Content Linked to Saudi Arabia
UK-France Coastal Patrol Agreement Nears Breakdown Amid Migration Pressures
UK Police Detain Pro-Palestine Activist Again Weeks After Bail Release
FTSE 100 Advances as Energy and Mining Shares Gain Amid Middle East Tensions
×