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BoE's Bailey says downside inflation surprises could spur faster rate cuts

BY Reuters | ECONOMIC | 11/07/24 08:45 AM EST

LONDON, Nov 7 (Reuters) - The Bank of England could move less gradually in cutting interest rates if inflation continues to surprise to the downside, Governor Andrew Bailey said on Thursday.

Bailey said the BoE's central view was that it would only be able to cut rates gradually, but he added that inflation had fallen faster than the central bank had expected in August.

"If that progress continues, then we will respond to it," he told reporters during a press conference.

Responding to an earlier question, Bailey said he would not specify if gradual rate cuts meant a quarterly pace of reductions to borrowing costs.

His comments came after the BoE cut interest rates for only the second time since 2020 and said future reductions were likely to be gradual, seeing higher inflation and economic growth after the new government's first budget. (Reporting by Suban Abdulla, David Milliken and Andy Bruce; Writing by Catarina Demony; Editing by William Schomberg)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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