BoE's Bailey Flags Upside Inflation Risks; GBP/USD Edges Toward 1.3555

Bank of England Governor Andrew Bailey said on Tuesday that he does not think the United Kingdom economy is on the verge of a recession, with the latest data showing slightly stronger activity, Reuters reported. Bailey stressed that activity remains weak by historical standards and that risks to inflation remain tilted to the upside, pointing in particular to energy and food prices as geopolitical tensions fuel renewed price-pressure risk.

Key takeaways from Bailey

• I do not think we are on the verge of a recession.
• Latest data is looking a bit stronger.
• Activity has been reasonably resilient but weak by historic standards.
• Risks to inflation are to the upside; risks to food price inflation are to the upside.
• The US–Iran war has led to high energy prices; they could be higher still.
• Ukrainian attacks on Russian refineries are also pushing up the cost of refined oil products.
• The market’s BoE rate curve reflects investors’ concern about further energy price rises.
• He wants to dispel the idea of a secret plan to raise rates unconditionally.
• The rise in UK mortgage rates is larger than almost anywhere in the G7.

Market reaction

The British Pound edged slightly higher following Bailey’s comments, with GBP/USD gaining 0.11% on Tuesday to trade around 1.3555 at the time of writing on that page.

Distinct from earlier Bailey GBP and Monday’s GBP Labor Day.

Also see: GBP/JPY Dips to Session Lows Near 207.50 at London Open as Yen Rallies Unfazed by Oil.

Informational only. Not trading advice, signals, or a guarantee of any market outcome.