Bank of England Governor Andrew Bailey speaks to the media at a press conference on the central bank’s monetary policy report at the Bank of England on February 1, 2024 in London, England.
Justin Tallis | Reuters
LONDON – Bank of England Governor Andrew Bailey on Thursday played down any political pressure on the institution and confirmed that a rate cut on the eve of a general election was not out of the question.
Traditionally, central banks bear the brunt of global political rhetoric. This is especially true during an election cycle if citizens are dealing with an economic recession or a cost-of-living squeeze. Incumbent lawmakers often call for looser policies, such as stimulus to the economy and people’s wallets, in the hope that it will influence how they vote. Opposition politicians would undoubtedly protest vigorously if favorable interest rate changes were to come ahead of time.
The Bank of England, which became formally independent in 1998, is no stranger to such pressures and is expected to hold an election before the end of this year. Although interest rates remained steady on Thursday, the central bank was still close to cutting interest rates for the first time since 2020.
Asked whether he would think twice about cutting interest rates in the weeks leading up to the election, Bailey told CNBC’s Steve Sedgwick: “If the evidence and all the assessments and deliberations we’ve done come up with (a rate cut) conclusion, then it’s actually our responsibility, it’s not just ‘can we?
The Bank of England kept interest rates unchanged on Thursday as expected and said restrictive monetary policy was curbing inflation, but warned that a rate cut in June was not a certainty. That means any possible cuts may be delayed until closer to the election in the autumn.
Members of the central bank’s Monetary Policy Committee voted 7 to 2 to keep interest rates at current levels, with the latter leaning towards a rate cut. At the previous meeting, only one member voted in favor of lowering the rate. The decision keeps the Bank of England’s key bank interest rate at 5.25%.
“It’s our job to always make these decisions because that’s our purview… I can assure you that’s what we’re going to do,” Bailey told CNBC.
“The reason we have central bank independence in many countries, including the UK, is that we can make these judgments over the longer term and we can be independent of any other cycles that are happening around us, including election cycles and that’s important .
—CNBC’s Jenni Reid contributed to this article.
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