“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,” Bailey told The Chronicle in Newcastle.
WATCH HERE: Liam Halligan on Andrew Bailey's growth outlook
“It does concern me that the supply side of the economy has slowed. It does concern me a lot.”
When asked about reducing interest rates, Bailey said that for the “foreseeable future” it was unlikely they would be cut.
Bailey also warned it would be “hard work” to cut inflation.
Although it has dropped sharply in recent months owing to lower energy prices, the Bank of England’s inflation rate is still more than double the current 2 per cent target - currently sitting at 4.6 per cent in the year to October.
Inflation was sitting at a peak of 11.1 per cent this time last year with Bailey claiming there was “more of that to unwind” from international energy and food prices.
However, he warned families should not expect sharp falls.
“We’re not going to see another month, I’m afraid, where it’s going down 2pc because of [energy],” he continued.
“By the end of the first quarter next year, when a lot of that unwind will have happened, we may be a bit under 4pc but we’ll still have 2pc to go, maybe.
“And the rest of it has to be done by policy and monetary policy.
“And policy is operating in what I call a restrictive way at the moment – it is restricting the economy.”
In a bid to tackle runaway prices, the Bank of England has raised interest rates to 5.25 per cent - a 15-year high.
Despite the pain on borrowers and those living in poorer households, Bailey defended the raise.
He said: “I’m very conscious of the position of the less well-off.
“But we do have to get it down to 2 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.”