The governor of the Bank of England has hit back at critics who accused him of being asleep at the wheel while inflation soared and a cost of living crisis hit UK living standards.
Andrew Bailey defends response to Covid pandemic and indicates that the British central bank will not take aggressive approach to raising interest rates
Bailey said he rejected the argument that \u2018the Bank\u2019s monetary policy committee let demand get out of hand and thus stoked inflation\u2019.
Bailey also said the nature of the shock meant higher interest rates could damage the economy, which recovered slowly from the pandemic during 2021.
Speaking at a conference in Vienna, he said high energy prices would do much of the work to depress consumer spending, allowing the central bank to take a less aggressive approach to raising interest rates.
\u201cWhat I reject is the argument that in our response to Covid, the Bank\u2019s monetary policy committee [MPC] let demand get out of hand and thus stoked inflation,\u201d he said. \u201cThe facts simply do not support this. On the latest number, UK GDP in March was only 0.6% above its pre-Covid level, and it is substantially below the path it was expected to follow pre-Covid.\u201d
Bailey\u2019s comments are likely to be interpreted as a notice that the MPC will stop short of increasing interest rates from 2% to 3% in the next year as expected by most City economists.
Bailey, who chairs the MPC, added that while low unemployment and a high level of vacancies were leading to a \u201ctight labour market\u201d, this was not the result of buoyant spending on Britain\u2019s high streets, but rather that the number of people seeking work had dropped.
\u201cWhat we do have is a very tight labour market. But that does not look like a story about rapid demand growth,\u201d he said. \u201cThe labour force has shrunk by around 1% since the onset of Covid. It looks much more like an impact from the supply of labour.\u201d
About 500,000 people who worked before the pandemic have stopped looking for a job, most of them over the age of 50. Another 500,000 who were expected to emigrate to the UK, mostly from eastern Europe, over the last two to three years have not done so.
The Bank has raised rates four times, from 0.1% to 1%, and is widely expected to increase them at least twice this year to 1.5%.
Bailey\u2019s comments came as the head of the European Central Bank (ECB), Christine Lagarde, said the eurozone\u2019s negative rates would end this year.
Signaling a policy shift to more rapid rate rises, she said the ECB was on track to lift its main policy rate from -0.5% back to zero by the end of September, causing the euro to strengthen against sterling and the US dollar.
Lagarde wrote in a blog that \u201cbased on the current outlook\u201d the institution was \u201clikely to be in a position to exit negative interest rates by the end of the third quarter\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"
The governor of the Bank of England has hit back at critics who accused him of being asleep at the wheel while inflation soared and a cost of living crisis hit UK living standards.Andrew Bailey defends response to Covid pandemic and indicates that the British central bank will not take aggressive approach to raising interest …<\/p>\n","protected":false},"author":13,"featured_media":51338,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[37,36],"tags":[9645,7562,6967,6987,8643,7619],"class_list":["post-65864","post","type-post","status-publish","format-standard","has-post-thumbnail","","category-forex-markets","category-market-updates","tag-aggressive-monetary-policy","tag-andrew-bailey","tag-boe","tag-inflation","tag-qt","tag-uk-economy"],"_links":{"self":[{"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/posts\/65864","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/comments?post=65864"}],"version-history":[{"count":2,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/posts\/65864\/revisions"}],"predecessor-version":[{"id":65868,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/posts\/65864\/revisions\/65868"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/media\/51338"}],"wp:attachment":[{"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/media?parent=65864"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/categories?post=65864"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/tags?post=65864"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}