(Bloomberg) -- Bank of England Governor Andrew Bailey said he saw “good news” in UK inflation figures that ticked down from a 41-year high, but that the central bank has more to do to prevent a wage-price spiral.

Speaking after policy makers lifted their key rate a half point to 3.5%, the highest since 2014, Bailey said the risk is that inflation sticks around longer that the BOE is anticipating.

“We think we have seen possibly the first glimmer — with the figures we have seen this week — that (inflation) is not only beginning to come down, but it’s a little below where we thought it would be,” Bailey said in a television interview broadcast by BBC News on Thursday. “And that’s obviously very good news.”

The remarks balance optimism that the worst of the cost-of-living crisis may be about to pass with concern that consumer prices could leap again. Policy makers are concerned that shortages of workers to fill vacant jobs are pushing up wages and potentially feeding an upward spiral in prices.

Bailey said that risk is “quite pronounced.”

Inflation fell more than expected to 10.7% last month after reaching a 41-year high of 11.1% the month before. Investors anticipate the BOE will raise its key rate to 4.5% by the middle of next year — implying two more hikes the size of the one Thursday.

The BOE’s nine-member Monetary Policy Committee split three ways on the decision announced Thursday, with Bailey in a majority of six backing the half-point hike. Two others wanted no change in rates, saying borrowing costs are already high enough to return inflation to target. One member of the panel wanted a bigger increase.

Bailey said he wouldn’t speculate about what the BOE would do next. Policy makers meet again in February and will issue new growth and inflation forecasts then.

“There’s a long way to go,” Bailey said. “We expect inflation to start falling more rapidly, probably from spring onwards. But there is a risk that it won’t happen in that way, particularly with the labor market and labor supply in this country being so tight.”

Read more:

  • BOE Says Inflation May Have Peaked as Rates Hit 14-Year High

(Updates with context from the fourth paragraph.)

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