Bank of England governor blames war on Ukraine Britain’s highest inflation in 30 years and warned that “doomsday” food prices caused by a Russian invasion could have a disastrous effect on the world’s poor.
Defending Threadneedle Street before announcing its biggest annual increase in four years on Wednesday, Andrew Bailey Told the MP that while he was unhappy with the level of price increases, the 80% overshoot of the inflation target was caused by factors beyond the bank’s control.
Bank cannot be expected to predict a war, says Bailey Ukrainehe warned of the implications for the UK and developing countries.
Countries such as Egypt and Tunisia rely heavily on Ukrainian wheat and edible oil exports, and the governor said his concerns about food supplies had grown after speaking with the Kyiv finance minister at an IMF meeting in Washington last month. .
“He said he was optimistic about the crops, but at the moment there is no way to get food out and it’s getting worse,” Bailey said. “It’s not just a major concern for this country, it’s a concern for developing countries. I’m sorry for the end of the world, but it’s a concern.”
Official data on Wednesday is expected to show annual inflation climbing above 9%, Bank of England The figure is expected to climb above 10% in October when the energy price cap is raised further.
Asked whether the central bank could have prevented inflation from surging earlier by raising interest rates earlier, Bailey told the Treasury select committee: “I don’t think we can. I don’t think we can foresee a war in Ukraine.
“Another factor that we are dealing with right now is the further impact of Covid, which is affecting China. We have seen a series of supply shocks ensuing that are unprecedented.”
Nine Monetary Policy Committees of the Central Bank rate hike At its last four meetings, it raised its forecast for peak inflation this year to 10% from 5%.
“I’m not happy at all, and it’s a terrible situation,” the governor said after congressmen asked him to explain why the bank had to wait until December to act.
Following reports over the weekend that unnamed cabinet ministers questioned whether the central bank should remain independent, Bailey said: “This is the biggest test of the monetary policy framework in 25 years. There is no doubt about it.”
Governor reiterated His call to limit wages in Februaryurging the highest earners to set an example for lower-paid workers.
“I do think people, especially those with higher incomes, should think and reflect on calling for high wage growth,” he said. “It’s a social issue. But I’m not preaching that. I shouldn’t be going around telling people what to do.
“In that sense, I know I might be interpreted as doing that, but I’m not. I mean, maybe people should reflect, especially people in that situation.”
Paul Nowak, deputy secretary of the Union Congress, said: “It is unbelievable that the Bank of England has repeatedly called for workers to lower wages, while almost saying nothing about soaring profits for companies such as BP and Shell. . In the worst living standards crisis, the last thing working people need right now is lower wages.”
Asked about future threats to the cost of living, Bailey said that if there were disruptions in China or rising energy prices, it could lead to prolonged supply chain bottlenecks Russia It was decided to cut off the gas supply.
However, he said the central bank cannot be expected to foresee recent events. “I did see Zhuge Liang’s comments after the fact, but we have to accept [monetary policy] Make a decision based on the facts and evidence at the time. “
His comments come after UK energy regulator Ofgem announced plans to change its price cap four times a year instead of the current two.
The regulator on Monday released a consultation on proposals for new reviews of price caps in January and July, adding to existing changes in April and October to respond more quickly to volatile markets.