Andrew Bailey emphasized to MPs that the UK Government’s commitment to cut inflation by half within the year is separate from the Bank of England’s own objectives.
This clarification follows the Prime Minister’s recent statement claiming the Government had succeeded in its promise to reduce inflation, which dropped to 4.6% last month.
During a Treasury Committee meeting with Bank officials, MP Dame Angela Eagle questioned whether the Prime Minister could be credited for the inflation reduction. In response, Mr Bailey clarified:
“The Government and the Prime Minister set a goal, which is distinct from ours. I need to make that distinction clear. My comments are purely factual regarding the figures, but they are not related to our target.”
When asked about who should be credited for the decrease in inflation, Bailey firmly stated, “The responsibility lies with the Bank of England.”
Bank of England officials engaged in a heated discussion with Conservative MP John Baron, who accused them of being slow to increase interest rates.
Governor Andrew Bailey and his team were quick to highlight that the Bank of England initiated rate hikes earlier than both the US Federal Reserve and the European Central Bank, emphasizing that these were the facts.
Deputy Governor Sir Dave Ramsden addressed the issue, acknowledging that when the Bank started increasing rates from the historic low of 0.1% in December 2021, headline inflation was at 5.4%. However, he refuted the idea that they were lagging, pointing out that services inflation, which makes up 45% of the overall inflation figure, was only at 3.2% at that time, though he did concede that fuel inflation was significantly higher at 23.6%.
Jonathan Haskell, another policymaker, mentioned that the Bank focuses more on the underlying figures as a more accurate indicator of inflation trends, rather than just the headline inflation rate.
