We’re not cutting interest rates because we think the recession may already be over and we’re not even sure we are in recession anyway. That was the gist of Governor of the Bank of England’s evidence to the House of Commons Treasury Select Committee this morning.

Bailey fell back on the traditional excuse of CEOs who get it wrong and send their businesses into a downwards spiral: the weather

Andrew Bailey reminded the committee of what happened ten years ago when Britain seemed to be on the verge of a triple dip recession. In the end, revisions of the GDP figures revealed that we had never even entered a double dip, yet a triple one.

There are signs of economic recovery, added Bailey. Services inflation and wage rises are still too strong. Real incomes rose by 1.8 per cent last year. While the Consumer Prices Index (CPI) might well fall to 2 per cent in the spring, it is then likely to rebound – although not to anything like the level it has reached over the past two years. No one should be fooled by a drop in the CPI in the short term, he said, because a lot of it will be to do with the energy component – which could soon be falling by 25 per cent.

Bailey’s words will not impress the Bank’s former chief economist Andy Haldane, who yesterday accused the Monetary Policy Committee of ignoring the recession and warned that they could ‘crush’ the economy. Haldane was expressing a growing view that while the Bank of England failed miserably to foresee the inflation surge two years ago, now it is failing in the other direction: to see the weakness of the economy.

Therese Coffey, a member of the select committee, expressed this very view, suggesting that the MPC may now be ‘over-compensating’ for its failure to raise interest rates quickly enough (although cynics may remind Coffey that she was deputy prime minister at a time when Kwasi Kwarteng’s mini-budget did its own bit to send interest rates surging).

Yet a year ago the Bank of England very much was predicting recession – indeed, in late 2022 it believed that GDP growth would remain negative throughout 2023. How come Britain avoided that fate? Bailey fell back on the traditional excuse of CEOs who get it wrong and send their businesses into a downwards spiral: the weather. Europe, he said, has enjoyed two mild winters, which helped to moderate energy price rises and keep us out of recession.

The alternative explanation is that the Bank of England just isn’t very good at economic forecasting, and the current membership of the MPC isn’t very good at fulfilling its only role: deciding the appropriate rate for the Bank of England’s base rate.

But whatever the past record of the Bank, the message being transmitted by Bailey seems to be: don’t expect the interest rate horizon to change as a result of last week’s GDP figures. The situation remains as it was before: interest rates are unlikely to fall before May, and don’t expect much of drop after that. The days of near-zero interest rates are not going to return in the near future, even if we are in recession.