MNI BRIEF: BOE Bailey: Inflation Should Fall Fast Next Year

The UK has seen almost no growth since the Covid-19 pandemic struck and had been hit by large supply side shocks but "we think inflation should come down rapidly next year as those shocks wear off," Bank of England Governor Andrew Bailey said Tuesday in general comments about the economy.

Speaking in a question and answer session at an OMFIF event, he downplayed the likelihood of persistently large pay increases, saying many firms had told them they were making one-off pay increases given the spike in cost of living costs.

On the framework for active gilt sales, set to be unveiled in August, Bailey said that Bank Rate would be the active policy tool, gilt sales would be steady and predictable and he stressed that while it was right to shrink the balance sheet the end point was unknown. "We don't know what the sustainable level of demand for reserves is," he said.