Interview with Bank of England Governor Andrew Bailey about Economic Impact of Conflict

The tightening of financial conditions since the start of the war in Iran is giving the Bank of England (BoE) room to determine the best response to the economic impact of the conflict, the bank’s governor, Andrew Bailey, said on Wednesday.

The rise in mortgage borrowing costs reflects a shift in investor attitude since the conflict began, Bailey told the Parliament’s Finance Committee.

“This tightening, I believe, also gives us a little bit of time to assess the situation,” he said.

Bailey was part of the majority on the Monetary Policy Committee (MPC) of the BoE, which voted to maintain the bank’s benchmark interest rate last April.

The MPC had stated that its response to the energy crisis caused by the war in the Middle East would depend on the scale and duration of the conflict, as well as its impact on the economy.

Bailey also mentioned on Wednesday that economic growth and labor market prospects have darkened, with wage agreements decreasing gradually.

However, he noted that energy prices in the market seemed “relatively moderate” compared to the damage to gas infrastructure in the Middle East as a result of the conflict.

(Reporting by David Milliken, written by William Schomberg, French version by Diana Mandia, editing by Blandine Hénault)