Governor Andrew Bailey of the Bank of England declared Thursday that the protracted Israel-Hamas war has the potential to disrupt the bank's efforts to reduce inflation. In an interview with CNBC's Joumanna Bercetche, Bailey acknowledged that the strife could have a significant influence on energy markets, leading to a rise in prices. "It is undoubtedly a risk going forward," he commented.
Bank of England Governor Andrew Bailey stated on Thursday that the current Israel-Hamas war may have an impact on the bank's efforts to reduce inflation. He added that other than the huge human toll the warfare has caused, the potential repercussions for energy markets could be significant, leading to an increase in pricing. Bailey went on to mention that so far, energy prices have not spiked drastically, which is a positive sign. Oil prices have been volatile due to investor concerns regarding the conflict escalating, prompting the World Bank to suggest crude oil prices could reach above $150 a barrel if things worsen. Bailey noted that the Bank of England's response to potential price inflation would be based on the wider economic circumstances and the expected duration of the rate increases. The Bank of England has continued its program of slowly increasing interest rates, however, in September, the rates were held steady. During the latest Monetary Policy Committee, 6 members voted to maintain the main bank rate at 5.25%, but three members wanted a hike to 5.5%. Bailey concluded that interest rates must remain in a restrictive range for some time and any risks are still to the upside, making it too soon to talk about cutting interest rates. Inflation in September was 6.7%, slightly above the estimated figure, and the bank now anticipates that the average consumer price index for the fourth quarter of 2023 will be around 4.75%, decreasing to 4.5% in the first quarter of 2024 and 3.75% in the second quarter of 2024.
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