The Bank’s Monetary Policy Committee will vote in two weeks on whether to change the base rate, which is currently at 5.25 %.
Economists are torn on whether there will be another rise.
And Mr Bailey said he couldn’t say now how the MPC would vote. But he told MPs it was no longer “clear” that interest rates needed to keep rising.
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He told the Treasury Select Comm-ittee: “There was a period where it seemed to me to be clear that rates needed to rise going forwards. And the question for us was how much and over what time frame.
“But we’re not I think in that place any more. And that’s why we shifted our language to being much more evidence and data-driven.
“I think we are much nearer now to the top of the cycle.
“I am not therefore saying we are at the top of the cycle because we still have a meeting to come. But I think we are much nearer to it, on interest rates, based on the current evidence.”
Inflation – the rate at which prices rise – fell to 6.8% in July, down from 7.9% in June. Prime Minister Rishi Sunak has said halving inflation from January’s 10.7% is his “number one priority”.
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Mr Bailey said: “We’re currently around 0.1 percentage points from where we were expecting to be in the May forecast. So…our short-term forecast is performing better.” He added there were signals “the fall in inflation will continue” and will be “quite marked” by the end of 2023.
But he warned rising fuel costs in August means inflation is likely to have gone up again when latest figures are released. And the Bank is waiting to see if falling inflation will “be reflected in wage bargaining” which can push it up.
Deputy governor Sir Jon Cunliffe said there were “mixed signals”, with continuing pay growth and services price inflation, but also “some cooling in the labour market”.
The Bank’s forecast came as the Resolution Foundation think tank warned any benefits from easing inflation would be wiped out by tax, mortgage and rent hikes.
It said households were facing 12 months of stagnating living standards in the run-up to the next election and no government has ever clung to power against such a dismal backdrop.
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