The Governor of the Bank of England cautioned that businesses could worsen inflation by persisting with price hikes.
Andrew Bailey warned that if “all prices try to beat inflation,” interest rates may need to be further increased. In February, inflation unexpectedly rose to 10.4%, which caused the Bank of England to raise interest rates for the 11th consecutive time.
The current inflation rate is still five times higher than the Bank’s 2% target. While Mr. Bailey had not seen evidence of unnecessary price increases, he warned that policymakers would have to act if inflation becomes “embedded.” He further stated that high inflation would harm society, particularly the least advantaged.
Andrew Bailey #BoE warns interest rates will rise again if companies hike prices.
Markets drop at the open: The #FTSE100 has dropped 0.5pc to 7,465.55 after the open while the domestically-focused #FTSE250 dropped 0.3pc to 18,666.83. pic.twitter.com/5YC2hvAHCO
— Share_Talk ™ (@Share_Talk) March 24, 2023
Mr Bailey told BBC Radio 4’s Today programme: “Higher inflation really benefits nobody. “It hurts people, and it particularly hurts the least well-off in society.
On Thursday, the Bank of England announced a rise in interest rates and unexpectedly upgraded its forecast for the UK economy, stating that it now anticipates slight growth in the second quarter of the year. This means that the country will not immediately slip into a recession, which is characterized by two consecutive quarters of negative growth.
Mr. Bailey expressed that at the beginning of February, the economy was in a precarious situation, and the possibility of a recession was high. While he acknowledged that the situation is not perfect, he expressed a greater degree of positivity, stating that he is “a bit more optimistic.”
