The Governor of the Bank of England has defended himself as a “realist” not an “ultra-pessimist” after being accused of painting a bleak picture of the UK economy.
Speaking during a fact-finding trip to Stoke-on-Trent yesterday, Andrew Bailey shrugged off reports that his interpretation of the current financial situation was too gloomy – just days after the Chancellor claimed the country had turned the corner.
Some national media outlets and commentators criticised the Bank of England chief for saying interest rates would not be cut in the “foreseeable future” and that the economy’s potential to grow was “lower than it has been in much of my working life”.
But speaking exclusively to Daily Focus at Michelin’s headquarters in Stoke after a day talking to businesses people from the area, he insisted there were questions still to be answered on inflation and the economy before interest rates could be cut.
He said: “We are seeing some weakening of economic activity. The Bank’s view is it is going to stay quite subdued for the next year.
“I’ve been written up this week as being an ultra-pessimist but I don’t see it that way. I see it as a realist view.
“That translates to us getting our sleeves rolled up and tackling the issues we face.
“We’ve got to get on and bring inflation down to our target of 2 per cent. That is the best thing we can do for growth in the economy – and we will do it.
“We start with a realist view but we are very, very, committed on behalf of the people of this country to get on with tackling the job.”
The Governor also reasserted his position that interest rate cuts were not currently on the table.
Mr Bailey said: “On inflation, we’ve clearly seen a sharp drop this year – from the peak which was just over 11 per cent around 12 months ago.
“The latest number is 4.6 per cent and to some extent we expected this because we saw the Ofgem energy bills contribution reducing.
“But two per cent is our target and we will do what it takes to get there.
“In terms of moving towards that figure, I would say that we will experience more of what I call the unwinding of some of the big external shocks we had last year.
“But I’m afraid we are not going to have another month of reduction like last month.
“Food price inflation still has some way to come down but on energy inflation we’ve probably seen most of that for now.
“By the end of the first quarter next year we’ll probably see that process working its way through but we are currently estimating inflation being a bit below 4 per cent by then.
“So obviously we’ve got further to go and that will be achieved by monetary policy – through interest rates.
“We are not in a place now where we can discuss cutting interest rates – that is not happening. We need to see how the final part of the journey down to 2 per cent inflation plays out; we have not seen enough of that journey yet to be confident.
“What I would say to business is the best thing we can do for them is get inflation back down.
“That makes them more sustainable and creates a more predictable and secure environment in which to plan ahead. Volatile inflation is not good for that.”
During his visit to North Staffordshire, the Governor – accompanied by the Bank of England’s Agent for the greater West Midlands region, Graeme Chaplin – met with a number of businesses.
He took part in a round table discussion on ceramics organised by the British Ceramic Confederation, held a question and answer session for pupils at St Thomas More Catholic Academy in Longton, Stoke-on-Trent, and paid a visit to the Potteries Shopping Centre in Hanley, before heading for a meeting at Michelin.
He said: “The feedback from businesses was very insightful and will help to shape our policy. They certainly painted a mixed picture on a range of topics from investment and growth to the labour market situation.
“The pupils were fantastic too – and their questions just brilliant. It is always my aim to get around to the 12 regions of the country with our agents for these kind of insights – it’s one of the best parts of the job.”
If this joker was a realist he would do something to stimulate the economy. It doesn’t get much more real than coming to our depressed corner of this fair isle. Hopefully dodging half naked money dust addicts urinating up your wall and shouting abuse, homeless people stealing to buy drugs and food, and economic migrants, he may feel inclined to help, or never come back!!