The Bank of England was not surprised that inflation didn’t come down in September, and found the latest ONS figures on price rises “encouraging”, its Governor Andrew Bailey revealed today.
In an interview with the Belfast Telegraph, Bailey said that the latest CPI reading, showing prices rose by 6.7%, the same as in August, was “not far off” what the Bank had expected.
“It was not far off what we were expecting. Core inflation fell slightly from what we were expecting and that’s quite encouraging,” Bailey said.
But he said that inflation should start to fall again soon.
“I understand, though, that people will want to see the evidence that inflation is coming down. I think we can see that evidence. I think that by the end of the year, we’ll see more evidence of that.”
He added that wages are still rising too fast to meet the Bank’s 2% inflation target. Wage growth cooled slightly in the three months to August, but at 8.1% when bonuses are included it remains close to record highs.
“Pay growth as measured is still well above anything that’s consistent with the target,” he said.
The Bank of England is set to make its next decision on interest rates on 2 November, after pausing its cycle of 14 consecutive rate hikes at its last meeting in September. City traders are divided on whether the current rate of 5.25% is the peak or if there is still one more hike in store.
Either way, it is likely to still be many months before rates come down again.
