The Bank of England is open to cutting interest rates further if the job market begins to slow down, according to Governor Andrew Bailey. In a recent interview, Bailey said, “I really do believe the path is downward,” suggesting interest rates may fall in the near future. The current rate is 4.25 percent and will be reviewed at the next Bank meeting on 7 August.
Interest rates directly affect millions across the UK, including those with mortgages, credit cards and savings. Bailey explained that the UK economy is growing below its full potential, which creates “slack” and helps ease inflation. He added that businesses are now adjusting working hours and slowing wage increases following the government’s decision to raise national insurance contributions for employers from 13.8 percent to 15 percent in April.
“I think the path is down. I really do believe the path is downward,” said Bailey. “But we continue to use the words ‘gradual and careful’ because… some people say to me ‘why are you cutting when inflation’s above target?’”
The Bank of England kept rates unchanged at 4.25 percent during its last meeting in June after two earlier cuts this year. Bailey has previously said that rates will follow a “gradual downward path.”
The UK economy shrank by 0.1 percent in May after another drop in April, mainly due to weaker manufacturing and retail performance. This puts more pressure on the government, which is focused on boosting growth.
Meanwhile, the high cost of electric vehicles in the UK remains a concern, with the average rates nearly double that of petrol cars at around £22,000. Some Chinese brands are now offering models starting at £18,000. An announcement is expected this week about plans to make EVs more affordable. When asked if taxpayer subsidies would be part of it, Transport Secretary Louise Alexander said, “I can guarantee to your viewers that we will be making it cheaper for those who do want to make the switch to an electric vehicle.”
Around 20 percent of new cars sold so far this year were electric, though still below government targets ahead of a planned petrol and diesel car sales ban in 2030.
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