BoE's Andrew Bailey says economy remains 'static' despite surprise Q4 GDP growth

Andrew Bailey has played down the upside surprise in last week's fourth-quarter GDP figures, saying that UK economic growth still remains "static".

The Bank of England governor said in an interview with BusinessLive on Monday that an expected acceleration in inflation is likely to be tempered by sluggish economic activity.

At a central bank meeting on 6 February, in which it lowered the Bank Rate from 4.75% to 4.5%, the Monetary Policy Committee said its predicts annual price growth will hit 3.7% later this year due to regulated costs increases in utilities, up from 3.2% in December.

Meanwhile, Friday's data from the Office for National Statistics, which showed an unexpected 0.1% expansion in UK GDP in the final three months of 2024 following no growth in the third quarter, had prompted concerns of rising price pressures.

“We’ve had the GDP numbers slightly stronger than we thought it would be, but I don’t think it changes the general story we have got, which is the economy has been quite static since late spring last year,” Bailey said.

“When we look at the underlying state of the economy, which is an important context for judging the persistence point, we have had a period of low growth and we think the labor market is softening,” he said.

The BoE governor said that gradual disinflation is still continuing. "The after-effects of what happened two or three years ago are wearing off, but it is a gradual process," he said.