Andrew Bailey has promised to lead the Bank of England for another four years, defying a series of calls from critics to resign.
The governor has faced accusations of being too slow to raise interest rates to curb runaway inflation, then erring in the opposite direction by keeping them too high for too long.
In an exclusive interview with The Mail on Sunday, he defended his tenure and insisted he would serve out his full eight-year term, which ends in 2028, saying there was “still a lot of work to do”.
Andrew John Bailey, Governor of the Bank of England since 2020
Bailey also painted a much more positive picture of the economy than Rachel Reeves. The chancellor has repeatedly said the economy is in its worst shape since the Second World War.
Bailey, who receives a salary of £495,000 a year, has come under fire on several fronts, including for focusing on a “conscious agenda” rather than concentrating on the economy and for failing to spot risks building up in the pension system before the bond market meltdown that toppled Liz Truss.
The Bank’s economic forecasts have come under fire in a report by former US Federal Reserve Governor Ben Bernanke.
And Bailey’s role as head of the Financial Conduct Authority watchdog in the London Capital & Finance scandal in 2019, where 11,600 savers lost £237m, has also come under scrutiny.
Chancellor Rachel Reeves has repeatedly said the economy is in its worst shape since the Second World War.
However, when asked if he planned to serve a full term, Bailey said: “Yes, definitely. It’s a great privilege to serve as governor and to have led the UK central bank through the pandemic, the ongoing war in Ukraine and dealing with its implications for inflation.
“But there is still much to do. I fully intend to serve my full term. I am looking forward to the next four years.”
Bailey has been criticised by unions and Downing Street for saying workers should help curb inflation by not calling for big pay rises.
Bailey has been criticised by unions and Downing Street for saying workers should help curb inflation by not demanding big pay rises.
He spoke to The Mail on Sunday after announcing the Bank’s first rate cut since taking over as governor at the start of the pandemic in March 2020. He used his deciding vote to cut the base rate to 5 per cent from a 16-year high of 5.25 per cent. The Bank’s nine-member Monetary Policy Committee was split down the middle.
Inflation has returned to the Bank’s 2 percent target from a peak of 11 percent nearly two years ago.
Asked if he agreed with Reeves’ dire economic claims, Bailey said he wouldn’t “get into politics” but added: “I think it’s good news and a reason to be optimistic that inflation is back on target.”
The Bank of England governor rejected a 2.5 per cent pay rise last year and his salary has not changed since he was appointed four years ago.
‘We speak to people and businesses across the country every day. For some time, the cost of living for households and production costs for businesses have been the main concern.
“Inflation has come down a lot over the last 18 months, so I hope those concerns are starting to dissipate. It’s our job to make sure they do.”
He said the best thing the Bank could do to support growth and prosperity was to keep inflation low and stable. The bank expects inflation to rise slightly later this year and is cautious about cutting rates “too quickly or too much.” The Bank has also upgraded its outlook for economic growth.
He rejected a 2.5 per cent pay rise last year and his salary has not changed since he was appointed, meaning a pay cut in real terms of a quarter if adjusted for inflation.
He praised the recent strength of the pound, the best-performing major currency this year, saying it had eased inflation. He added: “It will make imported goods and services a bit cheaper.”
Bailey said she had met Reeves twice since she became Britain’s first female chancellor and looked forward to a “cooperative and productive” relationship. The Bank was widely briefed on her apocalyptic claim last week that there was a £22bn-a-year hole in the public finances, which she said was far worse than feared.
Her critics say half of that supposed shortfall is due to her plans to give nurses, teachers and other public sector workers a pay rise of up to 6 percent.
Reeves’ figures were not included in the Bank’s latest forecasts, which will be updated after its Budget on 30 October.
He has defeated the detractors, for now
By Alex Brummer, City Editor
We are witnessing the transformation of a central banker. At the height of the “Truss tantrum” in October 2022 and with double-digit inflation, the usually phlegmatic governor looked a defeated man, under fire from MPs, economists and some of his former colleagues.
It had seemed unlikely that he would serve out his full term, which ends in March 2028, when he will be just under 70. But things have changed a lot. The Bank has cut inflation from 11 per cent to 2 per cent, its target, and last week Bailey felt confident enough to be the deciding vote on the first cut in borrowing costs in four long, miserable years.
In reality, it would have been difficult to overthrow him. The moral authority of central banks derives from their independence. Removing a leader midway through could wreak havoc on the government bond market.
Unlike the Chancellor, Bailey is optimistic about the situation in the UK. He rightly argues that as someone who visits businesses across the country every day, there is reason to be “optimistic”.
As one of its critics, I can only be glad that the Bank has managed to bring down inflation and helped the UK through the pandemic. But Bailey and his team must back up a growth agenda with a sustained series of interest rate cuts.
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