Interest rates could fall more quickly, Bank chief hints

One factor that could affect inflation is any impact on energy prices following an escalation in the conflict between Israel and the Iran-backed armed group Hezbollah in Lebanon.

“Geopolitical concerns are very serious. It is tragic what’s going on,” Mr Bailey told the Guardian.

“There are obviously stresses and the real issue then is how they might interact with some still quite stretched markets in places.”

The oil price has risen above $76 a barrel this week over fears that supplies could be disrupted.

However, the oil price is still lower than levels seen earlier this year, and well below the peak of more than $130 a barrel seen in the aftermath of Russia’s invasion of Ukraine in 2022.

“My sense from all the conversations I have with counterparts in the region is that there is, for the moment, a strong commitment to keep the market stable,” Mr Bailey said.

Mr Bailey was asked about claims from former Prime Minister Liz Truss, who alleged that her mini-budget in 2022 was not implemented because the Bank of England – among other members of the so-called “deep state” – had undermined her.

“I don’t know what she means by that,” Mr Bailey told the Guardian. He added that he had never met Truss, who was Britain’s prime minister for 49 days.

Mortgage rates soared in the wake of the mini-budget following turmoil on the financial markets.

The Bank of England will announce its next interest rate decision on 7 November.