Bank of England's Andrew Bailey: 'We are much nearer the top' of the hiking cycle

investmentweek.co.uk:

Andrew Bailey (pictured) is governor of the Bank of England. Credit: Bank of England

In a Treasury Select Committee hearing yesterday (6 September), he told MPs that, based on the current evidence and data, «we are much nearer the top of the [hiking] cycle».

Bailey admitted the UK is past the phase where rates needed to be raised, as the BoE's Monetary Policy Committee gears up for its upcoming decision on 21 September.

Huw Pill: BoE must 'see the job through' against inflation

The governor admitted inflation figures for August may be slightly higher than forecast due to an increase in petrol prices, but emphasised the inflationary path will continue to be downward.

This could potentially see the MPC voting for a final rate hike in September, as Bailey noted there is still a «substantial amount of transition to come» from the recent increases.

Bank of America recently forecast the Bank of England will increase rates to 5.5% and hold them at that level through 2024.

TSC chair Harriett Baldwin also quizzed the governor about the central bank's forecasting models, which are currently under review after the BoE admitted errors were made, with former Fed chair Ben Bernake appointed as lead of the review.

Bailey broadly defended the MPC and its decision not to compare the energy crisis of 2022 to the 1980s and 1970s.

Former Fed chair Ben Bernanke to lead Bank of England forecasting review

He noted the macroeconomic regime of the time was «very different» than last year's, highlighting how there were no inflation targets in the 1970s.

The governor added previous energy shocks were discussed in some MPC meetings «only where appropriate», tackling accusations of the BoE models' ‘recency bias'.

He said he did not «see it as a