Bank of England Signals Gradual Interest Rate Cuts

Bank of England Governor Andrew Bailey announced that interest rates will gradually decrease towards a 'neutral rate'. He expressed optimism about the downwards path of inflation and noted that interest rates are unlikely to return to historic lows. Economists expect further rate cuts in the near future.

Bank of England Governor Andrew Bailey has indicated that interest rates are set to gradually decrease towards a 'neutral rate'. In an interview published online by the Kent Messenger newspaper on Tuesday, Bailey expressed confidence in the current downwards trajectory of inflation.

Bailey stated, 'Therefore I do think the path for interest rates will be downwards, gradually.' However, he added that he does not expect rates to return to the historic lows close to zero seen four years ago, estimating instead that they would level out at a neutral rate.

Last week, the BoE maintained its main interest rate at 5% following a reduction from 5.25% in August, which was a 16-year high. Reuters polled economists who forecast a further reduction to 4.75% at the central bank's forthcoming meeting in November. Bailey emphasized that while further cuts are anticipated, they should be implemented progressively to avoid potential economic disruption.

(With inputs from agencies.)