The pound has dropped to a two-week low this morning, after the Bank of England governor told the Guardian that the central bank could become a “bit more aggressive” in cutting interest rates provided the news on inflation continued to be good. Andrew Bailey said he has been encouraged by the fact that cost of living pressures had not been as persistent as the Bank thought they might be. IBailey says that if the news on inflation continued to be good there was a chance of the Bank becoming more “a bit more activist” in its approach to cutting interest rates, now at 5%. This has knocked the pound, which is down 0.8 of a cent to $1.3185, its lowest level since 19 September (just before the Fed’s rate cut). The Bank had recently sounded more cautious about rate cuts than its counterparts in the US and the eurozone. It has only made one quarter-point cut this year, in August, while the Federal Reserve has cut US rates by half a point, and the European Central Bank has made two quarter-point cuts since June. The Bank is next scheduled to set interest rates in early November; the money markets suggest there’s an 88% chance of a cut, to 4.75%. Bailey made the comments in a wide-ranging interview, in which he explained he was watching developments in the Middle East “extremely closely”. He said: “Geopolitical concerns are very serious. It’s tragic what’s going on. There are obviously stresses and the real issue then is how they might interact with some still quite stretched markets in places.” Bailey said that in the year since the Hamas attack on Israel there had not been a big rise in oil prices of the sort seen in the past. He added: “From the point of view of monetary policy, it’s a big help we haven’t had to deal with a big increase in the oil price. But obviously we’ve had that experience in the past, and in the 1970s, the oil price was a big part of the story. “Obviously, we keep watching it. We watch it extremely closely to see the impact of the latest news. But … 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." The agenda • 9am BST: Eurozone services PMI index for September • 9.30am BST: UK services PMI index for September • 10am BST: Eurozone producer prices index for August • 12.30pm BST: Challenger survey of US job cuts for September • 1.30pm BST: US weekly jobless claims report We’ll be tracking all the main events throughout the day ...
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