(Bloomberg) -- Bank of England Governor Andrew Bailey said “the job is not done” on fighting inflation even though he expects those pressures to dissipate rapidly this year.

In an interview with the Orcadian newspaper, the governor said he expects the headline inflation rate to dip to 5% “or a bit below” by the end of 2023, but thereafter “we still have a way to go to bring it down” to the 2% target.

The comments indicate no scope for cutting interest rates, which the central bank in September left on hold for the first time since late 2021. Policy makers are trying to determine how long they need to leave borrowing costs at the highest level since 2008 to bring inflation back to their goal.

Bailey said food prices are likely to go down in the coming months and that inflation “is on a downward trend.” The BOE in August predicted inflation will average 4.93% in the fourth quarter. He said officials are looking carefully at labor market data for signs of inflationary pressures abating. 

“People can say, ‘I can see inflation coming down,’ and that starts to bring wage increases down — but we have to see that happen,” he said. 

Bailey suggested that the record pay growth that has fueled concerns over a wage-price spiral could be a lagging indicator.

“If it is a lagging indicator, it is lagging for longer than it has done in the past,” he said, according to the newspaper.

The BOE’s nine-member Monetary Policy Committee has played down the official wage figures in its September meeting minutes, instead putting more emphasis on survey data showing a weaker jobs market.



--With assistance from Philip Aldrick and Andrew Atkinson.

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