Bank of England could cut rates if job market worsens, says Governor
Bank of England Governor Andrew Bailey has indicated that the central bank could step in and cut interest rates if the job market continues to deteriorate.
Speaking to the Times, Bailey said Britain’s economy was growing behind its potential, opening up ‘slack’ that would help to bring down inflation, which is expected to rise above 3.4% when official figures for June are published this week.
“I really do believe the path is downward” for interest rates, which stand at 4.25 per cent but will be reviewed by the Bank’s monetary policy committee again on 7 August. “If we saw the slack opening up much more quickly, that would lead us to a different conclusion,” he said.
Concerns around the job market
There is clear evidence that the labour market has weakened since the Autumn Budget in October and that the weakness has accelerated since April.
The unemployment rate has risen from 4.3% in October to 4.6% in April, and the number of people on HMRC payrolls fell by 276,000 between October and May.
At the same time, the number of vacancies has dropped to just 736,000: that’s the lowest level since 2015, excluding the pandemic. The weakening seems to have accelerated since April, as the number of people on HMRC payrolls dropped by a whopping 109,000 in May alone.
The broader economy is not fairing much better. Data published by the Office for National Statistics on Friday (11 July) shows monthly real gross domestic product (GDP) is estimated to have fallen by 0.1% in May 2025, following an unrevised fall of 0.3% in April 2025 and growth of 0.4% in March 2025.
Real GDP is estimated to have grown by 0.5% in the three months to May 2025, compared with the three months to February 2025, largely driven by growth in the services sector in this period.
Services grew (+0.1%) in May, but production (-0.9%) and construction (-0.6%) both fell.
