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(Bloomberg) -- Bank of England Governor Andrew Bailey warned that the UK economy is still “static,” pouring cold water over surprisingly strong growth figures at the end of 2024.

In an interview on Monday, Bailey pointed to a tepid underlying growth picture and a “softening” labor market after the unexpected 0.1% rise in gross domestic product in the final quarter.

Last week’s growth figures were a boost for Labour after a dire run of economic indicators since the party returned to power last July. The BOE had expected a contraction in the final quarter, raising the risk of a technical recession early into Keir Starmer’s premiership.

“We’ve had the GDP numbers slightly stronger than we thought it would be, but I don’t think it changes the general story we have got, which is the economy has been quite static since late spring last year,” Bailey said in an interview with Business Live in Wales.

The BOE’s rate-setters have warned of a “gradual and careful” reduction in interest rates despite the stagnant economy, highlighting sticky inflationary pressures domestically and global political uncertainty.

However, some officials are growing increasingly concerned over the darkening economic outlook, with two, including former hawk Catherine Mann, backing a larger half-point cut at the February meeting. The rest of the committee voted for a quarter-point reduction to 4.5%.

Mann’s switch from hawk to dove has stoked tensions on the committee, with Bailey and Chief Economist Huw Pill making veiled criticism of her position. Bailey warned investors not to read too much into the vote, arguing that it is not a communication tool — the opposite of Mann’s aim of jolting markets into loosening financial conditions. Bailey said on Monday that Mann’s analysis was similar to his own but that she “reaches a somewhat different conclusion.”

However, Bailey also appeared to put more weight on the persistent weakness of the economy in the interview.

“When we look at the underlying state of the economy, which is an important context for judging the persistence point, we have had a period of low growth and we think the labor market is softening,” he said.

The UK central bank is trying to determine whether the economy’s anemic performance is caused by weakness in supply or demand, as the outcome is crucial for setting interest rates. Lower supply may generate inflationary pressures as even tepid demand bumps up against the economy’s limits.

“Clearly it matters as the more you think it is pure demand, then that is going to bring inflation down faster,” Bailey said.

The Governor also linked the economy’s woes to weak investment hampering productivity, and repeated a warning that “there isn’t a trade off between financial stability and growth” — a reference to the Labour government’s plan to reduce the burden of regulation.

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