Above: File image of Andrew Bailey. Edited from original @ Association of British Insurers, reproduced under Creative Commons Licensing.
Pound Sterling held multi-month highs against the Euro and Dollar on Tuesday, helped in part by fresh comments from the Bank of England's Governor, Andrew Bailey.
Bailey said he thinks UK interest rates will come down, but that progress in this direction would be slow, and a crisis-era Bank Rate close to 0% won't be coming back unless another crisis strikes.
"I do think the path for interest rates will be downwards, gradually," he told Kent Online.
Asked whether British households would again see rates near zero again, Bailey said "I would not expect" that "because what caused interest rates to go that way it was, amongst other things, two very big shocks to the economy."
"It all started with the financial crisis then Covid was another big shock," he adds.
Currency analyst Brad Bechtel at the investment bank Jefferies says Bailey is indicating "he doesn't see a return to very low rates in this cycle and that also helped to buttress the GBP a bit."
The GBP/EUR exchange rate rallied to its highest levels in more than two years on Monday and crossed 1.20 amidst expectations the UK's interest rates will fall slower than those of the Eurozone.
The GBP/USD exchange rate is meanwhile testing levels near 1.34 as U.S. interest rates start to come down, with the Federal Reserve delivering a bumper 50 basis point cut last week.
Consensus projections for the next four quarters, compiled from leading investment banks.
Access the full forecast →
For its part, the Bank said last week it thinks inflation risks remain and that a gradual approach to easing is appropriate.
As long as the UK is in the slowlane when it comes to interest rates cuts, the Pound can retain upside momentum.
"The GBP so far outperforming at the margins and likely to remain better bid against the likes of EUR, JPY and at times, USD, for the foreseeable future," says Bechtel.
