Homeowners were warned interest rates will remain high for the “foreseeable future”. The Bank chief said potential growth is at the lowest for more than four decades.
But Mr Bailey was told to apologise for his role in the country’s economic fortunes. Sir Iain Duncan Smith said the governor has a track record of being wrong.
He said: “He needs to be a little more judicious with his language and a little more apologetic about the mess they got into because of their failure to deal with interest rates early.
“They have had to go higher and further than other countries have and I think that is down to his watch, I’m afraid.
“So, I am sorry that he should choose to pour cold water over everything. “The UK economy is in a far better state than he thought it was. It’s outperformed all his dire predictions and I believe it will spring back.”
Senior Tory David Jones said: “It is regrettable that the Governor simply adds to people’s concerns by repeatedly talking the United Kingdom down.
“The British economy has shown itself considerably more resilient than many of its competitors, not least Germany, which is likely in recession.
“I’m sure the Governor remembers the dark days of the 1970s, when the UK had to call in the International Monetary Fund to bail us out. Those were really dark days – incomparably worse than today.
“The Governor needs to be more of a Tigger and less of an Eeyore.” Conservative MP Sir John Redwood said: “The Chancellor presented a brighter case for the UK economy only last week.
“It’s very important that the authorities help build confidence and get behind a strategy to cut inflation and get growth up.”
Chancellor Jeremy Hunt used his autumn statement last week to announce a national insurance cut and tax breaks for firms in an attempt to revive growth.
But Mr Bailey raised concerns about the UK’s economic future in an interview with a regional newspaper, saying the outlook is poor.
“If you look at what I call the potential growth rates of the economy, there’s no doubt it’s lower than it has been in much of my working life,” he told The Chronicle in Newcastle.
“It does concern me that the supply side of the economy has slowed. It does concern me a lot.”
The independent Office for Budget Responsibility (OBR) downgraded its growth forecasts last week to 0.7% in 2024 from the 1.8%.
Rishi Sunak rolled out the red carpet to hundreds of global investors for a major summit yesterday (MON) aimed at attracting funding and jobs to the UK.
The Prime Minister met the first of his five pledges earlier this month after inflation more than halved to fall to 4.6%in October.
But the long-term target the Bank works to is to keep inflation under two%.
Mr Bailey said meeting that goal will be “hard work”.
The governor said it was a “game of two halves”, with falling inflation in recent months down to falling energy costs.
He added: “I’m very conscious of the position of the less well off but we do have to get it down to two per cent and that’s why I have pushed back of late against assumptions that we’re talking about cutting interest rates or we will be cutting interest in anything like the foreseeable future because it’s too soon to have that discussion.”
The Bank held interest rates for the second consecutive month after 14 increases in a row to Its forecasts show inflation only returning to two% at the end of 2025.
Downing Street insisted the economy will keep “outperforming expectations”.
The Prime Minister’s spokesman said: “I think you heard from both the Prime Minister and the Chancellor on the UK’s economic outlook.
“We do believe that we have turned a corner, particularly given the success in halving inflation. And you saw an autumn statement which was designed to boost the UK economy with new policies like full expensing, which was long called-for by businesses and we are confident that as a result we will keep outperforming expectations.”
The row comes as peers criticised the Bank of England for being over-reliant on “inadequate” forecasts.
They called for its remit to be “pruned” by the Treasury and warned there is a “democratic deficit” because it cannot be adequately scrutinised.
The Lords Economic Affairs Committee report backed the continued independence of Threadneedle Street.
But it raised concerns after two years of inflation running out of control while the Bank seemed unable to produce accurate forecasts of what was to come.
Ben Bernanke, who chaired the US Federal Reserve during the 2008 financial crisis, has been brought in to review forecasting by the Bank.
“We are concerned that a democratic deficit has emerged, which risks undermining confidence in the Bank and its operational independence,” it said.
