Bank of England CEO Bailey says interest rates are near their peak

Painful rate hikes may soon come to an end as inflation heads for a “quite significant” decline, the Bank of England governor said.

Andrew Bailey told MPs that the bank was reaching the “top of the cycle” on interest rates – which have risen 14-fold since December 2021.

He told the Treasury Department’s special committee, “There was a time when it was clear that interest rates had to rise going forward and the question for us was by how much and over what period of time.”

“We’re not in that phase anymore.” I think the judgment is much finer now. I think we are much closer to the peak of the cycle now.”

Are we almost there yet? Bank of England governor Andrew Bailey says rates could be near peak

He added, “I’m not saying we’re at the end of the cycle because we have a meeting.” [of the rate-setting Monetary Policy Committee] come.

“But I think based on current evidence we’re a lot closer on interest rates.”

Mr Bailey said there were indications that the fall in inflation would continue and be “significantly more pronounced by the end of this year”.

However, he insisted his comments should not be taken as a hint at the bank’s next interest rate decision later this month – when markets expect interest rates to rise again to 5.5 percent.

Inflation remains at around 6.8 percent and financial markets expect interest rates to peak at 5.75 percent later this year. Those expectations have been pushed back slightly following Mr Bailey’s comments.

However, analysts warn it could be well into next year before they start falling, and the bank’s chief economist Huw Pill recently said rates may need to stay higher for longer rather than hit a sharp peak and then fall back .

Britain’s largest mortgage lender this morning revealed the toll higher interest rates are taking on the property market. The latest Halifax Index shows house prices have fallen 4.6 percent over the past year.

According to Halifax, the typical homeowner has lost £14,000 in value and the average house is now selling for £279,569. But the magnitude of the pandemic housing boom is such that values ​​are only going back to where they were in early 2022.