I am just being real about the economy, says Andrew Bailey

Andrew Bailey has claimed he is not an “ultra-pessimist” just days after warning that the outlook for the UK economy was among the worst he’d ever seen.

The Governor of the Bank of England hit back at accusations he was too gloomy, insisting he was being a “realist” about the UK’s growth prospects.

Furious Tory MPs accused the Governor of talking Britain down after he said there was “no doubt” that the UK’s growth potential was “lower than it has been in much of my working life”.

However, talking to the Staffordshire business news website Daily Focus on a regional visit on Tuesday, he said: “I’ve been written up this week as being an ultra-pessimist but I don’t see it that way. I see it as a realist view.

“That translates to us getting our sleeves rolled up and tackling the issues we face.”

The Bank believes the economy will flatline next year, with roughly a 50pc chance it will fall into recession.

It has forecast growth of 0.25pc in 2025, with productivity growth expected to remain weak.

The Bank’s predictions are much more pessimistic than the Office for Budget Responsibility (OBR), which believes the UK economy will grow by 0.7pc in 2024 and 1.4pc the following year.

Mr Bailey said Threadneedle Street policymakers were focused on their main job of bringing down inflation, which stood at 4.6pc in October.

He said: “We’ve got to get on and bring inflation down to our target of 2pc. That is the best thing we can do for growth in the economy – and we will do it.”

It came as Noel Quinn, chief executive of HSBC said he was more optimistic about the UK’s economic outlook, which has continued to defy doom-laden predictions of recession.

“I’m more optimistic on the global economic situation than the general sentiment is,” he told the FT banking summit.

“Even in the UK, I’m still more optimistic. People have been talking about the UK going into recession for the best part of two years and it still hasn’t.”

Mr Bailey warned that last month’s big drop in inflation was driven by changes in energy prices and was unlikely to be repeated.

“I’m afraid we are not going to have another month of reduction like last month,” he said.

Mr Bailey has previously warned that the “last mile” on bringing price rises down was likely to be the hardest. Policymakers do not believe inflation will return to the Bank’s 2pc target until 2025.

Mr Bailey said: “We start with a realist view but we are very, very, committed on behalf of the people of this country to get on with tackling the job.”

The Governor repeated previous comments that it was too soon to even talk about cutting interest rates from their current level of 5.25pc because inflation remained stubbornly high.

“We are not in a place now where we can discuss cutting interest rates – that is not happening. We need to see how the final part of the journey down to 2pc inflation plays out; we have not seen enough of that journey yet to be confident,” he said.

“What I would say to business is the best thing we can do for them is get inflation back down.

“That makes them more sustainable and creates a more predictable and secure environment in which to plan ahead. Volatile inflation is not good for that.”

Mr Bailey and his colleagues have been forced to push back against bets that Threadneedle Street will begin cutting rates next summer.

Bank of America said on Tuesday that the message was “finally resonating” with traders who have pared back their assumptions about rate cuts compared with a couple of weeks ago. Speculation about faster rate cuts was sparked by the Bank’s chief economist, who said assumptions about rate cuts next August were not “totally unreasonable”.

Huw Pill has since stressed that interest rates are likely to stay higher for longer.