Britain is suffering from a sharper economic slowdown than the rest of the West … and that could last longer, Bank of England bosses warn
- Britain suffers a sharper economic slowdown than other rich countries
- Inflation is set to last longer than anywhere else, Bank of England Governor warns
- Andrew Bailey says the economy at the “turning point” after the post-covid recovery
The UK is suffering from a sharper economic slowdown than other developed economies, and inflation appears to last longer than anywhere else, Bank of England Governor warns.
Andrew Bailey said the economy was at a “turning point” after the post-covid recovery, as it was hit by a “very big national income shock” in a harsh assessment.
And he said banks are ready to raise interest rates more aggressively as they fight to curb inflation.
The World Bank is tasked with keeping inflation at 2%, but prices are 9.1% higher than it was a year ago. This is the largest rise in 40 years.
Bank of England Governor Andrew Bailey said the economy was at a “turning point” after the post-covid recovery as it was hit by a “very big national income shock.”
Central banks themselves predict that inflation will reach 11 percent by the end of the year as energy price caps rise again and costs of other commodities, from food to fuel, rise. The soaring cost of living, which could put the economy in recession, raises questions about the Bank’s treatment of the economy under Mr Bailey.
Yesterday, alongside Portugal’s major central bank, he said:
He continued:’We have been hit by a huge national real income shock coming from outside. The magnitude of the shock is very large … because it reduces domestic demand, penetrates the labor market and goes through inflation.
“Looking at the UK economy at this point, it’s very clear that the economy is starting to slow down. In that respect, we are at some turning point.”
Bailey also warned that a further increase in the energy price cap in October, following the April increase, would further boost inflation.
The World Bank is tasked with keeping inflation at 2%, but prices are 9.1% higher than it was a year ago. This is the biggest rise in 40 years (file image)
The World Bank has been criticized for acting too late to curb inflation. We have raised our five-fold rate hike from 0.1% to 1.25% since December, but never exceed 0.25 percentage points at a time.
In contrast, the Federal Reserve Board has tripled since March, 0.25, 0.5, and 0.75 percentage points.
Bailey said banks have “options” to act more powerfully. This means that a 0.5 percentage point increase could soon appear on the card at the next meeting of the Monetary Policy Committee for Interest Rate Setting in early August.