England. Bank cuts rates if labor market slows

Bank of England Governor Andrew Bailey has indicated that the bank is willing to cut interest rates, currently at 4.25%, if the British labor market shows signs of a pronounced slowdown.

Speaking to The Times on Monday, Bailey admitted that there are signs that companies are "restricting employment" after the Government decided to increase employers' social security contributions.

British Finance Minister Rachel Reeves increased social security contributions last April from 13.8% to 15%, with the aim of generating an additional £25 billion (€28.75 billion) per year.

"I think the trend is towards lower interest rates, which will be reviewed at the next meeting of the British central bank's monetary policy committee on August 7.

“But we continue to use the words ‘gradual and careful’ because… some people say to me: ‘Why are they cutting when inflation is above target?’” he added.

Year-on-year inflation in the UK currently stands at 3.4%, above the central bank's target of 2%.

The governor stressed that the increase in social security contributions had a major impact on the reduction of the workforce .

He added that companies are "adjusting employment and schedules, and also with possibly lower salary increases than they would have been in the absence of the change in social security contributions."