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The Bank of England governor Andrew Bailey has insisted it is too early to talk about interest rate cuts even as speculation builds in financial markets that it will be in a position to ease policy next year.
Bailey said that while inflation would fall sharply in the coming months because of movements in energy prices, monetary policy needed to remain restrictive for an extended period of time, and that there remained “upside risks” to inflation including the threat of a wider conflict in the Middle East.
“Our forecast suggests inflation will be back at target in around a two-year horizon,” said Bailey during a conference in Dublin. “I am optimistic — I think it will happen. But I’m afraid we have got to continue to do the work to make it happen.”
Bailey was speaking after his colleague Huw Pill, the Bank of England chief economist, earlier this week suggested it was reasonable for markets to expect rate cuts from the middle of next year.
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