# BoE’s Bailey says rate-setters can put inflation before bank worries Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-03-28 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Bank of England Governor Signals Focus on Fighting Inflation Meta Description: BOE's Bailey reassures on banking system health, signals focus on fighting inflation in speech at London School of Economics. URL: https://financedigest.com/boes-bailey-says-rate-setters-can-put-inflation-before-bank-worrieshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-27t174930z2lynxmpej2q0tartroptp4britain-boe-1736814252274-compressed.jpg) By William Schomberg and Andy Bruce LONDON/MANCHESTER (Reuters) -Bank of England Governor Andrew Bailey signalled on Monday that interest rate-setters would focus on fighting inflation and would not be swayed unduly by worries about the health of the global banking system. Some investors have argued that central banks should take into account the banking turmoil when setting interest rates. On Sunday, Erik Nielsen, group chief economics advisor at UniCredit in London, said central banks should not separate monetary policy from financial stability at a time of heightened fears that [banking woes could lead to a broad financial crisis](https://www.financedigest.com/how-the-2023-banking-crisis-unfolded.html "How the 2023 banking crisis unfolded"). Bailey on Monday [pushed back against this view in a speech at the London](https://www.financedigest.com/citadel-accelerates-hiring-push-in-hong-kong-and-london.html "Citadel accelerates hiring push in Hong Kong and London") School of Economics. He said there were [“big strains” in the global banking](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too") sector, but added that banks in Britain were resilient and able to support the economy. With the Financial Policy Committee on the case of securing financial stability, the Monetary Policy Committee can [focus on its own important job of returning inflation](https://www.financedigest.com/oil-rises-about-2-with-u-s-and-china-inflation-in-focus.html "Oil rises about 2% with U.S. and China inflation in focus") to target,” Bailey said. The [key thing for the Monetary Policy](https://www.financedigest.com/key-fed-official-sees-rates-liftoff-in-2023-as-policy-debate-heats-up.html "Key Fed official sees rates liftoff in 2023 as policy debate heats up") Committee is that it has the tools to do its job – but those tools are not being constrained by other factors,” Bailey added, in answer to audience questions. The BoE has tightened policy repeatedly since December 2021, in a cycle that has pushed [Bank Rate from 0.1% to 4.25% today](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? "). Bailey said it would take [time for the effects](https://www.financedigest.com/how-can-financial-services-companies-compete-more-effectively-in-times-of-uncertainty.html "How can Financial Services Companies compete more effectively in times of uncertainty?") of this to be felt. When we look at the outlook for inflation today, we have to recognise that the full effect of the higher level of [Bank Rate is still to work its way through financial](https://www.financedigest.com/financial-crime-is-the-chink-in-the-banks-armour.html "Financial crime is the chink in the banks’ armour") markets and the real economy,” he said in his speech. Financial markets on Monday priced in one more BoE [interest rate](https://www.financedigest.com/hotel-investors-should-they-be-worried-about-a-potential-economic-pause-delving-into-inflation-interest-rates-recession-etc.html "‘Hotel Investors – should they be worried about a potential economic pause?’ delving into inflation, interest rates, recession etc") rise this year, taking rates to a peak of 4.5%. The odds of a hike in May stood at 52%. Talking to Reuters after his speech, Bailey said it was too soon to say if credit conditions in Britain had [tightened in reaction to global banking](https://www.financedigest.com/inflation-trumps-financial-risks-as-central-bank-tightening-set-to-continue.html "Inflation trumps financial risks as central bank tightening set to continue") system stress. “You can see very short-run … facts but for [monetary policy](https://www.financedigest.com/uks-ftse-100-dips-on-scope-of-tighter-monetary-policy-informa-jumps.html "UK’s FTSE 100 dips on scope of tighter monetary policy; Informa jumps"), you’d want a longer run. As well as the BoE, the [European Central Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters"), U.S. Federal Reserve and Swiss National [Bank have all raised interest rates this month, despite the high-profile bank failures including Silicon Valley Bank and Credit](https://www.financedigest.com/explainer-what-are-credit-default-swaps-and-why-are-they-causing-trouble-for-europes-banks.html "Explainer-What are credit default swaps and why are they causing trouble for Europe’s banks?") Suisse. In his speech, Bailey repeated the BoE’s view that further monetary tightening would be required if signs of persistent inflationary pressure became evident. With this in mind, the MPC’s [response will be firmly anchored in the emerging](https://www.financedigest.com/personal-emergency-response-systems-market.html "Personal Emergency Response Systems Market") evidence,” Bailey said. (Reporting by William Schomberg and Muvija M, writing by Andy Bruce; Editing by) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---