(Bloomberg) -- Bank of England Governor Andrew Bailey said it was too premature to consider cutting UK interest rates after the central bank held its base rate steady for the first time in almost two years. 

Bailey said the decision not to push ahead with a 15th consecutive rate hike, which had been widely anticipated at the start of the week, was due to “very good news on the inflation front.” On Wednesday, official data showed inflation pulling in at 6.7% — still more than three times the BOE’s target, but short of the increase to 7% that economists had expected.

As several economists suggested that Bank Rate had now peaked, Bailey stressed that the BOE was keeping the door open to further hikes. 

Read more: BOE REACT: Hiking Cycle Looks Like It’s Over, Cuts From 2H24

“We can’t be complacent about this,” he said in an interview with broadcasters on Thursday. “Our job is to get inflation back down to the 2% target and to sustain it there. So the job isn’t done yet.”

Bailey said the effects of the monetary policy tightening which the bank had been undertaking since December 2021, when it first bumped up its base rate from the pandemic rock-bottom of 0.1%, were now “coming through” in the economy.

Mortgage costs have shot up, causing a slow-down in housing market activity, and businesses have begun to complain that higher borrowing costs are causing them financial pain. 

But Bailey denied that Thursday’s pause in rate hikes should be taken as a sign that a cut would follow soon. “We have not had any discussion on the Monetary Policy Committee about reducing rates because that would be very, very premature,” he said.

Amid fears that higher oil prices might cause a resurgence in inflation towards the end of the year, Bailey said he was “watching the oil market very carefully.”

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