Andrew Bailey Says UK Inflation Second-Round Effects Remain Subdued

Bank of England Governor Andrew Bailey stated on Friday that second-round effects from high energy prices, where costs feed into wages and other goods, have remained subdued. Speaking at the Institute of International Finance annual meeting in Bangkok, Bailey noted that while these effects are currently limited, it is too early to form a firm view on the long-term trend.

Bailey described above-target inflation in the United Kingdom as "enormously frustrating" and characterized the domestic economy as more resilient than expected, though not as strong as necessary. He identified news from the Middle East as the primary driver of UK government bond yields, specifically linking the rate outlook to oil and gas prices tied to the Iran war.

These remarks adopt a more balanced tone than Bailey's warnings in late September. While the Bank Rate remains at 3.75%, the Governor's comments leave the possibility of a rate hike at the November 5 meeting open without signaling that such a move is imminent.