Key facts
- Bank of England Governor Andrew Bailey emphasized the importance of returning UK inflation to the 2% target.
- Bailey stated that assuring the public of the central bank's ability to achieve the target is essential.
- He indicated that raising the inflation target to 3% is not the solution to misses.
- Bailey emphasized the need to manage the path back to the 2% inflation target.
- He noted that current inflation is largely due to events in the Gulf.
- Public inflation expectations softened in May but remain elevated.
Bank of England Governor Andrew Bailey stated that it is important to return UK inflation to its 2% target and assure the public of the central bank's capability to do so. Speaking at his annual appearance before the House of Lords' Economic Affairs Committee, Bailey indicated that adjusting the inflation target to 3% is not the solution to misses, emphasizing the need to manage the path back to the current target. He noted that current inflation is largely due to events in the Gulf, though some signs suggest energy price shocks may have less lasting impact than initially feared. Public inflation expectations softened in May but remain higher than before the conflict. Bailey believes inflation would currently be at the 2% target level were it not for the conflict in the Middle East.