Bailey gave a speech about the cost of living squeeze and the future path of interest rates at a conference in London and warned that: “If we do too little with interest rates now, we will only have to do more later on. The experience of the 1970s taught us that important lesson,” Bailey said.
“But equally – second – we have to monitor carefully how the tightening we have already done is working its way through the economy to the prices faced by consumers. Our outreach events make clear that we need to calibrate monetary policy with great care to return inflation to target sustainably.
“That is the best contribution monetary policy can make to a fair society.”
The central bank has raised rates to 4% at its February meeting in an attempt to bring inflation down towards its 2% target.
Bailey warned that further rate hikes are not to be dismissed and that the final decision on interest rates will depend on the latest inflation figures.
“At this stage, I would caution against suggesting either that we are done with increasing Bank Rate, or that we will inevitably need to do more. Some further increase in Bank Rate may turn out to be appropriate, but nothing is decided. The incoming data will add to the overall picture of the economy and the outlook for inflation, and that will inform our policy decisions,” the governor said.
Inflation has fallen for three consecutive months to 10.1pc after hitting a record high of 11.1% in October - although it remains more than five times more than the Bank’s 2% target.