BoE Governor Andrew Bailey said overnight that the latest U.K. labor market data released this week reinforced his view that inflation pressures are continuing to ease gradually. Speaking at an IIF event in Washington, Bailey noted “I’ve been saying this for some time, but I think we’re seeing some softening of labor markets”.
Bailey acknowledged that uncertainty over U.S. tariffs had prompted many firms to delay investment plans, creating another drag on business sentiment. Meanwhile, he said the central bank had not yet observed any direct impact on inflation.
His remarks came as IMF Chief Economist Pierre-Olivier Gourinchas cautioned that the BoE must be “very cautious” with future rate cuts, given that U.K. inflation remains stubbornly high compared with peers. The IMF’s latest forecasts project U.K. consumer prices rising 3.4% in 2025 and 2.5% in 2026, the highest in the G7.
