The Governor of the Bank of England has said he is seeing “very encouraging signs” for the global economy.

Andrew Bailey told the IMF (International Monetary Fund) that he has witnessed “strong evidence” that the process to reduce inflation “is working its way through” as UK interest rates remain at a 15-year-high of 5.25%.

It came hours after the IMF unveiled new forecasts predicting that the UK will eke out slower growth this year than previously thought and remain the second-worst performer in the G7 group of advanced economies.

The UN financial agency also cautioned that the escalation of conflict in the Middle East risks pushing up food and energy prices across the world on Tuesday.

In an interview with the organisation, Mr Bailey highlighted signs of resilience across the economy.

“I agree with the IMF forecasts and that we are seeing very encouraging signs,” he said.

“We are seeing activity and resilience in the world economy, but we are seeing disinflation.

“In the UK we are disinflating at what I would say is full employment. But I see strong evidence now that the process is working its way through.

“Our judgment with interest rates is how much do we need to see now to be confident of the process.”

It comes amid weakening predictions from financial markets in recent weeks over how quickly the central bank will cut interest rates.

This saw further pressure on Tuesday morning after the Office for National Statistics revealed higher than expected wage growth, at 6%, for the three months to February.

Mr Bailey also stressed that the UK and other European countries are seeing different challenges to policymakers in the US.

He said: “I think the dynamics of inflation are rather different between Europe and the US.

“There is more demand led inflation pressure in the US than we are seeing, so I think the inflation dynamics are different.

“We are still seeing the extension of the process of coming out of the big supply shocks that we had – the impact of the war, the impact of coming out of Covid.”