Bloomberg Audio Studios, podcasts, radio news. Bank of England Governor Andrew Bailey caution markets against reading too much into how policymakers voted this month. He spoke with Bloomberg's Guy Johnson after officials decided to cut interest rates to a nineteen month low.
You've used the words gradual and careful, so I'll try to sort of provide some explanation and hope it helps. Word gradual is not new. We've been using it for some time and the reason for using that word is because we think that there is an underlying path of disinflation and that's supporting us cutting rates. That disinflation is all about the sort of the erosion of the persistence of inflation that we had coming out of the very big, obviously shocks that we had few years ago. Now we
haven't changed off beyond that. We think that we are seeing this path at disinflation and that's why we've cut rates today. But we have to go on watching that carefully to see whether it will continue. So nothing changed on that front. Why have we introduced the word careful? There is an awful lot of uncertainty around in the world around us. I'm afraid at the moment, and I would just emphasize, as we've said today that that uncertainty is two sided. It's on both sides. So let me
just sort of draw that out. We' seen weak activity in the UK economy. The question is to what it sent? Is that a weakening of demand? To what I sent, it is a weakening of the supply capacity of the economy. And what mixture of the two is it, because that's critical because one of them leads to lower inflation, the other leads to higher inflation. It's very hard to read at the moment, so that's one of the critical things.
And then we've got more uncertainty around us. We've got we are going to get to pick up an inflation over the coming months. We don't think that will of course persistent effects, but we're going to have to watch it very carefully. And to finish, the world around us is a very uncertain place at the moment.
Okay, from the starting point of gradual means once a a what you are saying, never said that? Okay, Okay, that has been the implication the market is inferred that that is what that means. You've inserted careful, does that mean you have to wait just in terms of the timing around the when rate cuts are going to come. Do you need more information so that that effectively the cuts are more backloaded because you need more information before you can make a decision.
And when the way I know, the way I would inserted, is this the sort of the set of things that we are going to have to judge every time we meet has just got more complicated.
Frankly, don't make it harder to make a decision to cut rates because as you say, it's symmetrically you don't know whether.
It's it's going to give us a lot more to think about it every time, and we're going to be careful in the way we do it. But it's meant to say, look, there is more uncertainty. Don't take from that a particular directional message other than I still think the path is down yep, but the world is more uncertain.
Are you still trying to get to one hundred basis points worth a cup this year?
Well, I've never been trying to get to a number. Actually, I mean, I'm trying to get inflation sustainably to target. That's my dread. Whatever whatever path of the interest rates does it will be the one.
Can you understand why the vote split looks stubbish?
I can, but I would always caution you not to put much right.
So it's not a communication tool.
It's not a communication tool. And the reason it's not a communication we do not sit down and say what should we what do we want the vote split to be? This time? Each member votes their own position. I don't know going in what the vote's going to be. In that sense, there reason, and I always say there's no group think on the MPC. People vote their own position.
You can, and I would always I would encourage the market to read the minutes pretty carefully this time, because you will see a series of positions set out in the voting. You know, there are there are those of us who voted for the cut, some of whom put emphasis on uncertainty and the word careful, some of whom wanted it to be a bit more directional and wanted the work cautious and so careful. But we're just careful
in the end. And then you've got the two members who voted for a larger cut, and if you read the paragraph that comes over, they're probably in different places themselves. So don't put too much weight on the voting.
That's Bank of England Governor Andrew Bailey speaking with Bloomberg Sky Johnson