Bank of England Governor “Very Worried” about Rising Inflation | bank of england
The prospect of an interest rate hike before Christmas became more prominent after the Governor of the Bank of England told MPs he was troubled by the rising rate of inflation in the UK.
Testifying before the Commons Treasury Select Committee, Andrew Bailey said he was “very worried” about the rising cost of living and was about to vote for increased borrowing costs at the last meeting of Threadneedle Street to decide interest rates earlier this month.
The governor sided with the majority when the Bank’s Monetary Policy Committee (MPC) voted 7-2 to keep rates at 0.1%, but made it clear he could change his mind at the next meeting in December.
“All meetings are at stake,” he said, raising the possibility that the Bank could start tightening its policy for the first time since the start of the Covid-19 pandemic. “We are in the business of price stability.”
The Bank currently expects inflation to peak at 5% next spring, well above the 2% target set by the government at the bank, but Bailey said he abstained from voting for increased borrowing costs this month because ‘he wanted more proof of the job market after the leave.
“I am very worried about the inflation situation,” he said. “I want to be very clear on this. This is of course not where we wanted to be, to have above target inflation. On the decision itself, however, it was a very close appeal in my opinion, ”added Bailey.
The governor said anecdotal evidence suggested that the closure of the leave scheme in late September had not resulted in a significant increase in unemployment. There will be two more official labor market updates from the Office for National Statistics ahead of the next MPC meeting, the first being Tuesday.
Financial markets were caught off guard by the MPC’s decision to leave rates unchanged in November, following Bailey’s comments widely regarded as suggesting a hike was imminent.
Bailey said neither he nor any other bank policymaker had ever promised a rate hike in November, but added that he wanted to make it clear that the MPC takes the need to meet the inflation target seriously. .
“I thought it was essential that we get our foot on the ground at this point,” he said in comments likely to reinforce the city’s current feeling that borrowing costs will rise on December 16.
Michael Saunders, one of two MPC members who voted for a November hike, said the postponement of the action could cause interest rates to rise faster and more in the future, but has said it was out of place to talk about a return to the inflationary spiral of wages and prices of the 1970s. .