The Bank of England's governor, Andrew Bailey, has indicated that the UK recession may be coming to an end, with "distinct signs of an upturn" now apparent.
He noted that compared to historical standards, this recession is notably mild. Official figures revealed last week that the UK economy contracted by 0.3% between October and December, marking a continuation of the downturn that began in the preceding quarter. However, the Bank of England suggested that an immediate interest rate cut is unlikely.
Deputy governor Ben Broadbent emphasized that the traditional definition of a recession, based on consecutive quarters of economic contraction, may not be entirely applicable. He highlighted differences in calculation methods used by other countries like the US.
While some MPs urged for immediate action, Bailey explained that the Bank is awaiting further evidence, particularly regarding wage growth and job vacancies, to gauge the trajectory of inflation. He mentioned the potential impact of falling energy prices, expected due to adjustments by Ofgem, the energy regulator.
Bailey noted that although lower energy prices might temporarily reduce overall inflation, it could rise again over time. He stressed the importance of observing more evidence of economic improvement before making significant policy decisions.
Broadbent expressed the possibility of interest rate cuts later in the year, contingent upon the actual economic data and its evolution. He emphasized the need to carefully assess the timing of any adjustments based on ongoing economic trends.