Bank of England (BoE) governor Andrew Bailey has warned that interest rates may have to remain near current levels for some time, despite the recent drop in the inflation rate.
Speaking at a National Farmers' Union event, Bailey emphasised the ongoing risks of high food and energy prices influencing wage demands, potentially sustaining inflationary pressures.
Some loosening of monetary policy might have been expected after a sharp month-on-month decline in the headline inflation rate to 4.6% in October, from 6.7%.
However, Bailey stressed the importance of reducing inflation to the BoE's 2% target and remained vigilant for signs of persistent inflation that might necessitate further interest rate hikes.
With the BoE Monetary Policy Committee maintaining interest rates at 5.25% in November, Bailey dismissed discussions of imminent rate cuts.
He indicated that monetary policy might need to remain restrictive for a considerable period, citing concerns over high services inflation and potential risks from climate change, global economic fragmentation, and Middle Eastern conflict impacting energy and food production costs.