BoE's Bailey sees no rush to act on interest rates

LONDON, June 30 (Reuters) - Bank of England Governor Andrew Bailey said on Tuesday that the central bank remained in no rush to respond to increased oil prices and that inflation was on course to return to its 2% target, albeit later than he would have liked.

Bailey said past increases in oil prices meant British inflation looked likely to rise to around 3.2% later this year from 2.8% in May, but the cost of oil now was not much higher than before the Iran war broke out at the end of February.

"We've had some tightening built into the (bond yield) curve, which gives us some time then to judge the pass-through (of higher energy prices)," he said in an interview with CNBC in Sintra, Portugal, where he is attending a conference hosted by the European Central Bank.

Bailey made similar remarks earlier this month when he was part of the 7-2 majority on the BoE's Monetary Policy Committee that voted to keep interest rates on hold at 3.75%.

The BoE's response contrasts with that of the ECB, which raised rates for the first time since 2023 this month. But Bailey said Britain had effectively had a rate rise already as market rates had risen since the start of the conflict after the BoE said it no longer expected to cut rates this year.

Bailey added that he disagreed with BoE Chief Economist Huw Pill, who voted for a rate rise this month as he feared other policymakers were getting complacent about high inflation and that it risked persistently overshooting its 2% target.

"We are not complacent at all," Bailey said. "The evidence would suggest we will come back to target, but — frustratingly —later than we thought we would."

(Reporting by David Milliken; Editing by Muvija M and William James)