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HomeUK NewsBank of England will have to act in curbing inflation, says Governor

Bank of England will have to act in curbing inflation, says Governor

The Bank of England Governor signals that central Bank is preparing to raise interest rates amid a surge in energy prices

Andrew Bailey, the governor of Bank of England, said he continued to believe the recent jump in inflation would be temporary. 

The Bank of England governor has warned that it will “have to act” to curb the rising inflation in the UK, sending a new signal that it is gearing up to raise interest rates.

Andrew Bailey said that he had continued to believe that the recent jump in inflation would be temporary, but he predicted that a surge in energy prices would push it higher and make its climb last for longer, increasing the risk of higher national inflation expectations.

This comes after The Office for National Statistics (ONS) has said that job vacancies within the UK hit 1.1 million between the months of July and September, the highest level since records had began back in 2001.

“Monetary policy cannot solve supply-side problems – but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations,” Bailey said on Sunday during an online panel discussion organised by the Group of 30 consultative group.

“And that’s why we at the Bank of England have signalled, and this is another such signal, that we will have to act,” he said. “But of course that action comes in our monetary policy meetings.”

The Bank has forecast that the UK’s inflation rate will rise above 4% by the end of 2021, more than double its target, as the world economy reopens from its coronavirus lockdowns, causing many shortages of supplies and staff, and the price of energy soars.

Investors of the Bank are speculating that it might become the first of the world’s biggest central banks to raise rates, this year or early in 2022.

Bailey has said that demand for workers within the UK had been stronger than expected and that the number of both younger and older workers leaving the labour market has now grown. “I do have concerns about labour supply growth,” he said.

This comes after councils have warned that motorists could be stuck on icy roads this winter because of a shortage of gritter drivers. The Local Government Association says that the public sector is struggling to compete with the gritter driver salaries on offer from hauliers, as the fallout from a shortage of HGV drivers rumbles on.

But Bailey said that he did not believe there was a “general pattern of labour market pressure” as wages had climbed strongly in some sectors but less so in others.

He also said that there were lessons for governments seeking to prevent future supply chain shocks within the way that financial regulators had responded to the shock of the global financial crisis of the years 2007 and 2008, including regular stress tests.

“I’m not saying we have the magic answer to supply chains across the board, but I think there are lessons that we have learned, in terms of resilience, that can usefully be adapted and used and translated into some other markets, particularly for instance when I look at energy supply,” he said.

Eve Cooper
I've been writing articles and stories for as long as I can remember and in the past few years I've had the fortune of turning that love & passion for writing into my job :)

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