BoE's Bailey: Market Pricing Reflects Energy Worry, Not Certain Rate Path
BoE Governor Andrew Bailey says market rate expectations include a risk premium from energy worries, and dismisses any notion of a pre-set rate hike path.
Bank of England Governor Andrew Bailey has told lawmakers that financial markets are pricing in an extra layer of caution regarding future interest rate moves, driven largely by concerns over further energy price increases.
Appearing before Parliament's Treasury Committee, Bailey explained that the central bank's internal analysis of the market curve for interest rate expectations shows investors have added what he termed a "risk premium." This premium, he said, goes beyond what would be justified by the Bank's own projected policy actions alone.
"When you look at the market curve, and when you break the market curve down as far as we can do ... they've got essentially a risk premium in there," Bailey told the committee.
In his remarks, the Governor also sought to push back against the narrative that a rate increase is an inevitable, pre-determined step. He stressed that any decision would depend on how economic conditions actually evolve rather than following a fixed timetable.
"What I want to dispel is the idea that we've really got a secret plan, we know where we're going to go to and it's unconditional," he added.