Interest rates will continue to be brought down slowly even as inflation comes under control - but are unlikely to return to the near-zero rates of the previous decade.
Those were the sobering words of Bank of England Governor Andrey Bailey yesterday.
Mr Bailey said he was “very encouraged” by falling inflation, which has dropped from a peak of 11.1% in October 2022 to 2.2%, just shy of the Bank’s 2% target.
However, the governor, who voted to hold borrowing costs at 5% at the Monetary Policy Committee’s meeting earlier this month, told the Kent Messenger, a local newspaper, that he did not expect rates to return to the ultra-low levels of the post-financial crisis 2010s.
He said: “Will we go back to the very low near zero interest rates that we had until not that long ago? I would not expect that because what caused interest rates to go that way it was, among other things, two very big shocks to the economy.
“It all started with the financial crisis then Covid was another big shock. To go back down to those levels, you’d have to have very big shocks. Of course, you don’t want very big shocks to happen.
“That’s one way of saying my best guess will be it settles at a neutral rate — quite what that will be depends on a lot of things — but I expect rates to come down.”
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