WEBVTT - Bank of England Governor Andrew Bailey Talks Rate Decision

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Bank of England Governor

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<v Speaker 1>Andrew Bailey caution markets against reading too much into how

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<v Speaker 1>policymakers voted this month. He spoke with Bloomberg's Guy Johnson

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<v Speaker 1>after officials decided to cut interest rates to a nineteen

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<v Speaker 1>month low.

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<v Speaker 2>You've used the words gradual and careful, so I'll try

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<v Speaker 2>to sort of provide some explanation and hope it helps.

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<v Speaker 2>Word gradual is not new. We've been using it for

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<v Speaker 2>some time and the reason for using that word is

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<v Speaker 2>because we think that there is an underlying path of

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<v Speaker 2>disinflation and that's supporting us cutting rates. That disinflation is

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<v Speaker 2>all about the sort of the erosion of the persistence

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<v Speaker 2>of inflation that we had coming out of the very big,

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<v Speaker 2>obviously shocks that we had few years ago. Now we

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<v Speaker 2>haven't changed off beyond that. We think that we are

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<v Speaker 2>seeing this path at disinflation and that's why we've cut

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<v Speaker 2>rates today. But we have to go on watching that

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<v Speaker 2>carefully to see whether it will continue. So nothing changed

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<v Speaker 2>on that front. Why have we introduced the word careful?

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<v Speaker 2>There is an awful lot of uncertainty around in the

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<v Speaker 2>world around us. I'm afraid at the moment, and I

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<v Speaker 2>would just emphasize, as we've said today that that uncertainty

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<v Speaker 2>is two sided. It's on both sides. So let me

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<v Speaker 2>just sort of draw that out. We' seen weak activity

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<v Speaker 2>in the UK economy. The question is to what it sent?

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<v Speaker 2>Is that a weakening of demand? To what I sent,

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<v Speaker 2>it is a weakening of the supply capacity of the economy.

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<v Speaker 2>And what mixture of the two is it, because that's

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<v Speaker 2>critical because one of them leads to lower inflation, the

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<v Speaker 2>other leads to higher inflation. It's very hard to read

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<v Speaker 2>at the moment, so that's one of the critical things.

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<v Speaker 2>And then we've got more uncertainty around us. We've got

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<v Speaker 2>we are going to get to pick up an inflation

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<v Speaker 2>over the coming months. We don't think that will of

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<v Speaker 2>course persistent effects, but we're going to have to watch

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<v Speaker 2>it very carefully. And to finish, the world around us

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<v Speaker 2>is a very uncertain place at the moment.

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<v Speaker 3>Okay, from the starting point of gradual means once a

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<v Speaker 3>a what you are saying, never said that? Okay, Okay,

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<v Speaker 3>that has been the implication the market is inferred that

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<v Speaker 3>that is what that means. You've inserted careful, does that

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<v Speaker 3>mean you have to wait just in terms of the

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<v Speaker 3>timing around the when rate cuts are going to come.

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<v Speaker 3>Do you need more information so that that effectively the

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<v Speaker 3>cuts are more backloaded because you need more information before

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<v Speaker 3>you can make a decision.

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<v Speaker 2>And when the way I know, the way I would inserted,

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<v Speaker 2>is this the sort of the set of things that

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<v Speaker 2>we are going to have to judge every time we

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<v Speaker 2>meet has just got more complicated.

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<v Speaker 3>Frankly, don't make it harder to make a decision to

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<v Speaker 3>cut rates because as you say, it's symmetrically you don't

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<v Speaker 3>know whether.

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<v Speaker 2>It's it's going to give us a lot more to

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<v Speaker 2>think about it every time, and we're going to be

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<v Speaker 2>careful in the way we do it. But it's meant

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<v Speaker 2>to say, look, there is more uncertainty. Don't take from

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<v Speaker 2>that a particular directional message other than I still think

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<v Speaker 2>the path is down yep, but the world is more uncertain.

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<v Speaker 3>Are you still trying to get to one hundred basis

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<v Speaker 3>points worth a cup this year?

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<v Speaker 2>Well, I've never been trying to get to a number. Actually,

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<v Speaker 2>I mean, I'm trying to get inflation sustainably to target.

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<v Speaker 2>That's my dread. Whatever whatever path of the interest rates

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<v Speaker 2>does it will be the one.

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<v Speaker 3>Can you understand why the vote split looks stubbish?

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<v Speaker 2>I can, but I would always caution you not to

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<v Speaker 2>put much right.

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<v Speaker 3>So it's not a communication tool.

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<v Speaker 2>It's not a communication tool. And the reason it's not

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<v Speaker 2>a communication we do not sit down and say what

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<v Speaker 2>should we what do we want the vote split to be?

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<v Speaker 2>This time? Each member votes their own position. I don't

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<v Speaker 2>know going in what the vote's going to be. In

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<v Speaker 2>that sense, there reason, and I always say there's no

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<v Speaker 2>group think on the MPC. People vote their own position.

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<v Speaker 2>You can, and I would always I would encourage the

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<v Speaker 2>market to read the minutes pretty carefully this time, because

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<v Speaker 2>you will see a series of positions set out in

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<v Speaker 2>the voting. You know, there are there are those of

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<v Speaker 2>us who voted for the cut, some of whom put

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<v Speaker 2>emphasis on uncertainty and the word careful, some of whom

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<v Speaker 2>wanted it to be a bit more directional and wanted

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<v Speaker 2>the work cautious and so careful. But we're just careful

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<v Speaker 2>in the end. And then you've got the two members

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<v Speaker 2>who voted for a larger cut, and if you read

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<v Speaker 2>the paragraph that comes over, they're probably in different places themselves.

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<v Speaker 2>So don't put too much weight on the voting.

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<v Speaker 1>That's Bank of England Governor Andrew Bailey speaking with Bloomberg

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<v Speaker 1>Sky Johnson