The Bank of England is preparing to cut interest rates if the UK job market continues to weaken, Governor Andrew Bailey has said in a new interview with The Times. Bailey’s remarks come ahead of the central bank’s next monetary policy meeting on August 7, where economists widely expect a potential rate cut from the current 4.25%.
“I really do believe the path is downward,” Bailey said, emphasizing the need for a “gradual and careful” approach despite inflation remaining above the Bank’s 2% target. His comments reflect growing concern about the UK economy’s underperformance and a softening labour market.
The UK economy has shown signs of strain, shrinking by 0.1% in May after a similar contraction in April, according to the Office for National Statistics (ONS). The manufacturing sector and weak retail sales have been major contributors to the decline. At the same time, recent data show the number of job vacancies has dropped to 736,000 the lowest since 2021 while the availability of workers has increased at the fastest pace since the Covid-19 pandemic.
Bailey noted that businesses are adjusting their hiring and working hours, and are now offering smaller pay rises. These trends follow Chancellor Rachel Reeves’ decision to increase employers’ national insurance contributions from 13.8% to 15% in April a policy expected to raise £25 billion annually.
Analysts say the governor’s remarks indicate the Bank is moving closer to easing monetary policy. Louise Dudley, portfolio manager at Federated Hermes, told the BBC Today programme that a rate cut is likely “sooner rather than later”.
The Bank of England has already cut rates twice in 2025, but held them steady at its June meeting. Bailey previously stated that the Bank would pursue a “gradual downward path” on rates, and the latest signals confirm that stance remains intact.
For millions of Britons, a rate cut would impact mortgage, credit card, and savings rates. As the Bank weighs its next move, all eyes will be on economic data and the evolving state of the UK labour market.
