Bank of England Governor Andrew Bailey addresses the media during the central bank’s Monetary Policy Report press conference at the Bank of England, in London, Britain, on February 1, 2024.
Justin Tallis | Reuters
LONDON — Bank of England Governor Andrew Bailey on Thursday played down any political pressure received by his institution, confirming that a rate cut immediately before a general election wouldn’t be out of the question.
Traditionally, central banks have born the brunt of political rhetoric across the globe. This is especially true in election cycles if citizens are dealing with an economic downturn or a cost-of-living squeeze. Incumbent lawmakers would often call for looser policy, for example, to stimulate the economy and peoples’ wallets in the hope that it could influence how they vote. Opposition politicians would undoubtedly protest strongly if a favorable rate move occurs beforehand.
The Bank of England, which became officially independent in 1998, is no stranger to this pressure with elections expected before the end of this year. The bank is nearing its first rate cut since 2020, despite holding steady on Thursday.
When asked whether he would think twice about a rate reduction just weeks before an election, Bailey told CNBC’s Steve Sedgwick: “If the evidence and all the assessment and deliberation we do lead to the conclusion [of a rate cut] then actually it’s our duty, it’s not just a ‘shall we, shan’t we?'”
The Bank of England on Thursday held interest rates as expected and said restrictive monetary policy was taming inflation, but warned a June rate cut was not a done deal. This means that any possible reduction could be pushed back closer to the fall, when the general election is expected.
Members of the central bank’s Monetary Policy Committee voted 7-2 to maintain rates at their current levels, with the latter favoring a cut. In its prior meeting, only one member voted to reduce rates. The decision keeps the BOE’s key bank rate at 5.25%.
“Our duty in our job is to take those decisions at all times, because that’s our remit. … And I can assure you, that is what we will do,” Bailey told CNBC.
“The reason we have central bank independence in so many countries, the U.K. included, is so that we can take these judgements with a longer-term horizon and we can take them independently of any other cycle going on around us, including an electoral cycle and that’s important.”
— CNBC’s Jenni Reid contributed to this article.
