If inflation decreases, Bank of England's Bailey predicts four interest rate reductions in 2025.

• The Bank of England Governor Andrew Bailey suggested that there may be four interest rate cuts in the near future.
• According to the Financial Times, Bailey stated that inflation had decreased at a faster rate than the central bank had predicted.
• The Bank of England is projected to make three rate cuts in the upcoming year, according to market expectations.

If inflation continues to decline, the Bank of England Governor Andrew Bailey has indicated that the UK may experience four interest rate cuts in the upcoming year.

In a Financial Times video interview, Bailey stated that if the central bank's inflation projections of "a little bit of persistence" are realized, it would likely carry out four quarter-point cuts over the next year.

The Bank of England is currently on hold with interest rates at its December meeting, according to LSEG data. If all four rate cuts of 25 basis points materialize, the bank's key interest rate will be around 3.75%, bringing the total number of cuts this year to two. The institution began cutting rates over the summer and plans to take a "gradual" approach to lowering them, as stated by Governor Bailey in November.

He stated that monetary policy must remain restrictive for an extended period until the risks of inflation returning to the 2% target over the medium term have dissipated further.

On Wednesday, the BoE governor stated that consumer prices had decreased at a faster rate than the central bank had predicted while assessing the inflation situation.

"During the interview, he stated that a year ago, we predicted inflation today to be 1% higher than it currently is, which serves as a good evaluation of the central banking regime."

In October, U.K. inflation surpassed market expectations with a 2.3% increase from the previous month's 1.7%.

On Wednesday morning, Sterling was trading flat, reaching $1.2671 by 11:52 a.m., and partially offsetting its earlier losses.

The yield on the U.K.'s 10-year gilts remained unchanged at approximately 4.273%.