Andrew Bailey, the Bank of England governor, indicated that a cut in interest rates is possible if the jobs market weakens. He noted that changes in National Insurance Contributions are leading to slower pay rises for businesses. This situation could create 'slack' in the economy, aiding in reducing inflation and slowing price increases on goods. Bailey conveyed a cautious optimism about future rate cuts despite inflation exceeding targets, emphasizing a gradual approach. Concurrently, Treasury chief secretary Darren Jones highlighted recent job creation and the government's support for business adjustments to sustain employment growth.
"I really do believe the path is downward. But we continue to use the words 'gradual and careful' because... some people say to me 'why are you cutting when inflation's above target?'"
Bailey said that businesses are 'having pay rises that are possibly less than they would have been if the NICs change hadn't happened.'"
This could trigger 'slack' which will help to bring down inflation, this in turn will see the prices on goods will rise more slowly.
We've also seen the creation of hundreds of thousands of new jobs across the country, and it's normal for business to make adjustments to their plans, depending on the cost of business, in the normal way.
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