The Governor of the Bank of England yesterday said ‘cautious’ consumers were holding back on spending as he hinted at further interest rate cuts – sending the pound lower against the dollar.
Andrew Bailey told West Midlands Life that there was still a ‘further journey down’ for rates – as long as inflation cools.
Sterling fell by as much as a cent against the dollar to just above $1.34 – a three-week low.
Bailey said: ‘People are being quite cautious. That affects spending so that has an effect on the state of the economy.
‘People aren’t going out as much, they’re not shopping as much, they’re not going out to restaurants as much and so on.’
The Bank faces stubborn inflation – currently 3.8 per cent – and signs of a struggling economy and weakening jobs market.
Tentative: Bank of England governor Andrew Bailey (Ipictured) told an interviewer for West Midlands Life that there was still a ‘further journey down’ for rates – as long as inflation cools
Cutting rates could boost the economy but leaving them higher may be necessary to try to tackle inflation.
Markets expect rates to stay at 4 per cent until next year.
Bailey said: ‘We have to balance all these things because we want to bring inflation back to target, but obviously want to do that within an economy that has some sustained activity in it.’
And he made clear that much of the blame for the rise in food prices – which is driving inflation – could be blamed on government decisions to hike employer national insurance and the minimum wage.
‘Labour costs have gone up in the food industry. It has been affected by the national insurance increase, it is affected by the living wage,’ Bailey said.
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This article was originally published by a www.dailymail.co.uk . Read the Original article here. .