(fxcue news) - The Bank of England could move a "bit more aggressively" on interest rate cuts, Governor Andrew Bailey said in an interview with The Guardian newspaper, published online on Thursday, causing a steep fall in the pound to a near three-week low. The BoE had reduced its benchmark rate by a quarter-point in August, which was the first reduction since March 2020. In a tight 5-4 vote, the bank had cut the rate to 5.00 from a 16-year high level. UK inflation has retreated from its highs and is currently at 2.2 percent, slightly above the 2 percent target. More favorable development on the inflation front could make the bank become "a bit more activist" in its rate-cutting stance, Bailey said. He noted that the cost of living crisis has not been as persistent as the bank had estimated it might be. Shortly after the interview was published, the pound declined sharply against the dollar and the euro as markets were expecting the BoE to lower interest rates gradually. Bailey also said that the UK central bank is closely monitoring the developments in the Middle East, adding that geopolitical tensions are "very serious". The worsening of the crisis could destabilize oil prices, he noted. "From the point of view of monetary policy, it's a big help we haven't had to deal with a big increase in the oil price," the BoE governor said. Referring to the past experience, especially that of the 1970s, Bailey said central banks are watching the developments "extremely closely" to see the impact of the latest news and there is a strong commitment to keep the market stable. "There's also recognition there's a point beyond which that control could break down if things got really bad," Bailey said. "You have to continuously watch this thing, because it could go wrong," he warned. Regarding economic growth, the BoE Chief said "I think the economy has come through the shocks of the last five years better than many of us feared. So there's a base there to develop."