BoE's Bailey: March interest rate cut remains a 'genuinely open' call

By David Milliken and Andy Bruce

BoE Outlook for the March Rate Decision

LONDON, Feb 24 (Reuters) - Bank of England Governor Andrew Bailey said on Tuesday that an interest rate cut in March was a possibility although services price inflation in recent data - which is closely watched by the central bank - had not fallen as much as hoped.

Bailey told lawmakers he would need further evidence to feel confident about cutting borrowing costs at its policy announcement on March 19, having voted with a 5-4 majority on the Monetary Policy Committee to hold interest rates this month.

Bailey: March Cut Is a 'Genuinely Open' Question

"Well, we'll see. I think at the moment I would say we're still a little way off (from) the next meeting.... It is a genuinely open question at the moment," he told parliament's Treasury Committee.

Inflation Seen Near 2% in April Data

Bailey reiterated the BoE's view that headline inflation was likely to fall sharply to around the central bank's 2% target in data for April which is due to be published in May.

Consumer price inflation cooled to 3.0% in January, official data showed last week - only slightly above the BoE's forecast published earlier this month.

Services Inflation Running Above Forecast

But services price inflation, a critical gauge of domestic inflation pressure, was markedly higher than the BoE's forecast for the month, at 4.4% against its projection of 4.1% - something Bailey flagged in his comments to lawmakers.

Food Prices Fell More Than Expected

"Food prices were off a bit more than we expected, but services prices .... didn't come off as much as we thought they would," Bailey said.

Huw Pill Flags Underlying Price Pressures

BoE Chief Economist Huw Pill, who this month said the central bank had cut interest rates too quickly for his liking, reiterated his concern about the strength of underlying price pressures in the economy.

The BoE should not be complacent about inflation returning to target in the spring, he said.

Warning Against Complacency at 2% CPI

"It's important that we are not beguiled by the achievement of 2% headline CPI inflation. I think there's an element of us in the past having ... given more weight to that than perhaps we should have done," Pill said.

It remained important to "bear down" on inflation pressure, he said.

Additional reporting and editing credits

(Additional reporting by Suban AbdullaWriting by Andy BruceEditing by William Schomberg)