Further
“global
shocks”
are
a
major
threat
to
the
UK
economy,
Bank
of
England
(BoE)
governor
Andrew
Bailey
has
told
MPs,
amid
concerns
over
oil
supplies
following
violence
and
disruption
on
Red
Sea
shipping
routes.
Speaking
to
MPs
on
the
Treasury
Select
Committee,
Bailey
said
he
was
hoping
to
see
mortgage
costs
continue
to
fall
after
the
Bank
paused
hiking
interest
rates
last
year.
However,
when
asked
about
the
top
threat
facing
the
UK
economy
in
2024,
he
also
highlighted
the
clear
“potential
for
further
global
shocks”.
The
BoE
is
now
monitoring
the
situation
in
the
Red
Sea
closely,
he
said,
after
an
escalation
in
attacks
by
Iran-backed
Houthi
rebels
on
large
container
ships
in
the
critical
trade
route
through
the
Suez
Canal.
Oil
giant
BP
said
last
month
it
was
pausing
all
shipments
of
oil
through
the
Red
Sea
because
of
the
threat
of
attacks.
Meanwhile,
shipping
rates
have
soared,
leading
select
shipping
companies
like
Maersk
to
enjoy
fortuitous
share
price
rallies.
“We’ve
certainly
seen
–
as
best
we
can
tell
from
the
monitoring
–
shipping
traffic
is
being
affected
and
is
being
rerouted.
That
will
increase
shipping
prices
and
shipping
costs,”
Bailey
said.
“I
think
initially
that
will
be
an
issue
in
the
monetary
policy
world.”
Though
he
welcomed
the
absence
of
a
“prolongued
spike”
in
oil
prices,
he
also
implied
that
could
change
quickly.
“We
have
to
watch
it
very
carefully,
though,
because
it
is
obviously
having
an
effect,”
he
told
the
committee.
Sarah
Breeden,
the
deputy
governor
for
financial
stability
at
the
Bank,
likewise
said
“uncertainty”
was
a
major
threat,
and
encompassed
the
macroeconomic
environment,
geopolitical
tensions,
credit
risks
and
unemployment.
“The
risk
environment
at
the
moment
feels
particularly
challenging
(…)
I
do
think
the
set
of
circumstances
that
we
currently
face
are
extraordinary,”
she
told
MPs.
Elsewhere
in
the
session,
Bailey
was
asked
about
how
UK
households
were
faring
in
the
current
climate
of
higher
interest
rates,
a
line
of
questioning
that
led
the
Bank
boss
to
recognise
there
are
people
in
the
UK
living
in
“very
difficult
circumstances”.
“We’ve
now
had
quite
a
big
change
in
market
interest
rates
in
recent
months,
so
that
the
cost
of
mortgages
is
coming
down,”
Bailey
responded.
“Let’s
just
take
the
market
for
the
moment
–
obviously
that
is
feeding
through
into
mortgage
costs
and
I
hope
that
is
something
that
continues.
I
think
the
rental
market
is
more
stretched
because
you’ve
got
a
higher
proportion
of
low-income
households
in
the
rental
market.
“Rental
inflation
is
currently
around
6%.
(…)
I
really
hope
that’ll
come
down
and
lower
interest
rates
obviously
help
that
as
well.”
By
Anna
Wise,
PA
Business
Reporter
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