BoE's Bailey says renewed Gulf hostilities underline stability risks
Financial Stability Concerns Amid Renewed US-Iran Hostilities
LONDON, July 14 (Reuters) - Bank of England Governor Andrew Bailey said on Tuesday that Britain's banking system is resilient but he was concerned about the impact on financial stability from the resumption of hostilities between the United States and Iran in recent days.
Bailey's Previous Assessment of Risks
Bailey said last month, when he voted with the 7-2 majority on the BoE's Monetary Policy Committee to hold interest rates, he thought that risks from the war in Iran were around the lower end of the central bank's three scenarios.
Fragility of the Ceasefire
"But I would have added the very strong caveat to that it seems to me that the situation remained unstable, and the ceasefire was fragile," Bailey told lawmakers on the Treasury Select Committee,
Recent Developments and Market Impact
He said he now thought the breakdown of peace talks and resumption of attacks underlined instability risks.
Bond Yields and Inflation Concerns
British government bond yields on Tuesday rose to their highest level since May as U.S.- Iran tensions pushed up oil prices, reigniting inflation concerns. Investors also ramped up their bets on interest rate hikes by the BoE after a Federal Reserve official hinted at an increase in borrowing costs soon.
Political Uncertainty and Economic Outlook
Asked whether the next change in Britain's prime minister would affect financial stability, Bailey declined to comment on politics but said the UK outlook was backed by the government's fiscal framework as well as monetary policy set by the BoE.
Importance of Economic Growth
He also stressed the importance of speeding up Britain's economic growth.
Bailey's Emphasis on Growth
"I think the big issue is growth in the economy. So I think we can do all we can on financial stability," Bailey said.
(Reporting by William Schomberg and Phoebe Seers; writing by Suban Abdulla; Editing by William Schomberg)
