Andrew Bailey has vowed to lead the Bank of England for four more years, defying a string of calls from critics to resign.
The Governor has faced accusations of being too slow to raise interest rates to curb runaway inflation – and then erring in the opposite direction by keeping them too high for too long.
In an exclusive interview with The Mail on Sunday he defended his record. He insisted he would serve his full eight-year term, which ends in 2028, saying ‘there is still a lot of work to be done’.
Andrew John Bailey, Governor of the Bank of England since 2020
Bailey also painted a much more positive picture of the economy than that of Rachel Reeves. The Chancellor has repeatedly claimed the economy is in its worst shape since the Second World War.
Bailey, who is paid £495,000 a year, has been attacked on several fronts, such as focusing on a ‘woke agenda’ instead of concentrating on the economy and failing to spot risks building in the pension system ahead of the bond market debacle that toppled Liz Truss.
The Bank’s economic forecasting has come in for criticism in an report by the US’s former Federal Reserve governor Ben Bernanke.
And Bailey’s role as head of the Financial Conduct Authority watchdog in the London Capital & Finance scandal in 2019 where 11,600 savers lost £237 million, has also come under scrutiny.
The Chancellor Rachel Reeves has repeatedly claimed the economy is in its worst shape since the Second World War
However, asked if he planned to serve a full term, Bailey said: ‘Yes, definitely. It is a great privilege to serve as Governor, and to have led the UK’s central bank through the pandemic, the – sadly – continuing war in Ukraine, and dealing with their consequences for inflation.
‘But there is still a lot to be done. I absolutely intend to serve my full term. I’m very much looking forward to the next four years.’
Bailey has come under fire from unions and was ticked off by Downing Street for saying workers should help curb inflation by not asking for big pay rises.
Bailey has come under fire from unions and was ticked off by Downing Street for saying workers should help curb inflation by not asking for big pay rises
He spoke to The Mail on Sunday after delivering the Bank’s first rate cut since he became Governor at the start of the pandemic in March 2020. He used his casting vote to lower the base rate to 5 per cent from a 16-year high of 5.25 per cent. The Bank’s nine-member Monetary Policy Committee was split down the middle.
Inflation is back at the Bank’s 2 per cent target from a high of 11 per cent almost two years ago.
Asked if he agreed with Reeves’ dire economic claims, Bailey said he would not ‘get drawn into politics’, but added: ‘I do think it’s good news, and a reason to be optimistic, that inflation is back on target.
The Bank of England Governor declined a 2.5 per cent pay rise last year and his salary is unchanged since he was appointed four years ago
‘We talk to people and businesses up and down the country every day. For some time, the cost of living for households and the costs of production for businesses have been the number one concern.
‘Inflation has fallen a lot over the past 18 months. So I hope those concerns will begin to fade. It’s our job to make sure they do.’
Keeping inflation low and stable was the best thing the Bank could do to support growth and prosperity, he said. It is forecasting a slight rise in inflation later this year, and he is cautious about cutting rates ‘too quickly or by too much’. The Bank has also upgraded its outlook for economic growth.
He declined a 2.5 per cent pay rise last year and his salary is unchanged since he was appointed, meaning a real terms pay cut of a quarter if adjusted for inflation.
He hailed the recent strength of sterling, this year’s best performing major currency, saying it had taken the edge off inflation. He added: ‘It will make imported goods and services a little less expensive.’
Bailey said he had met Reeves twice since she became Britain’s first female Chancellor, and expected a ‘cooperative and productive’ relationship. The Bank was extensively briefed on her doomsday claim last week that there was a £22 billion-a-year hole in the public finances, which she said were far worse than feared.
Her critics say half of that alleged shortfall is because she is planning to give nurses, teachers and other public sector workers pay rise of up to 6 per cent.
Reeves’ figures were not included in the Bank’s latest forecasts, which will be updated after the her Budget on October 30.
He’s trounced the detractors – for now
By Alex Brummer, City Editor
We are seeing a central banker transformed. At the height of the ‘Truss tantrum’ in October 2022 and with inflation in double digits the usually phlegmatic Governor appeared a beaten man – under fire from MPs, economists and some of his former colleagues.
It seemed unlikely he would serve out his full term, ending in March 2028 when he will be a shade under 70. But how things have changed. The Bank has driven inflation down from 11 to 2 per cent, its target. And last week Bailey felt confident enough to be the casting vote in the first cut in the cost of borrowing for four long and miserable years.
In truth he would have been hard to oust. The moral authority of central banks stems from their independence. Removing a leader midstream might cause havoc in the market in Government bonds.
In contrast to the Chancellor, Bailey is upbeat about the UK is. He argues, correctly, that as someone who visits businesses up and down the country every day there is reason to be ‘optimistic’.
As one of his critics I cannot be anything but delighted that the Bank managed to bring inflation down and helped steer the UK through the pandemic. But Bailey and his team need to get behind a growth agenda with a sustained run of interest rate cuts.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.