AI ‘critical’ for faster growth in UK economy, says BoE’s Bailey

Artificial intelligence and robotics will be a “critical source” of faster growth that is needed in the UK economy, the governor of the Bank of England has said.

Andrew Bailey said there was a “different growth story” in the UK to the US, where he was attending the Federal Reserve’s annual conference at Jackson Hole, Wyoming.

“Having said that, I think AI is critical here because we need to see faster growth in the UK, we need to see faster productivity growth, and I think AI and robotics are a critical source of that,” he said in an interview with Bloomberg TV.

On the topic of the cost of living, Bailey said he felt that so-called second-round effects of inflation in the UK were “quite subdued”, meaning things like wage demands and broader shop price increases.

“We are looking at the second-round effects of energy shocks, we’re looking at the question of do we expect inflation to return to target and over what time,” he said.

“The UK situation at the moment, so far, is I think we’re seeing quite subdued second round effects.

“I think we’ve seen a softening of the labour market for some time now.

“That’s why I’ve taken the view that I think we can watch this situation for the moment. But we have to come back to it.”

He added: “I think we are seeing at the moment relatively muted second-round inflation effects but obviously this is an evolving situation and I can’t give you any promise that will continue.

“Our job is to get inflation back to target and we will do that.”

The Bank of England is tasked with keeping consumer price index inflation at a 2% rate.

CPI inflation rose to 2.9% in July, the highest rate since March after energy prices were pushed up by the Iran war, official figures showed.

The Bank of England has kept UK interest rates on hold at 3.75% since December in a bid to keep a lid on price pressures.

Bailey’s remarks came after his US counterpart, Kevin Warsh, said inflation is still too high and suggested the Federal Reserve may have to raise interest rates in the coming months to bring it down.

The Fed chairman acknowledged that recent inflation reports show it has cooled slightly, but “they do not tell me that underlying trends have meaningfully improved”.

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” he said.

“Otherwise, we have work to do.”

source: PA

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