Bank of England will need to act to curb inflation, says Bailey

Bank of England will need to act to curb inflation, says Bailey

The Governor of the Bank of England has warned that it “should act” to curb rising inflation, sending another signal that it is preparing to raise interest rates.

Bailey said he continued to believe the recent surge in inflation would be temporary, but predicted that a surge in energy prices would push it higher and prolong its rise, increasing the risk of expectations. higher inflation.

“Monetary policy cannot solve the problems on the supply side – but it will and must act if we see a risk, especially for medium-term inflation and medium-term inflation expectations.” Bailey said Sunday during an online panel discussion. organized by the Group of 30 advisory group.

“And that is why we at the Bank of England have signaled, and this is another such signal, that we will have to act,” he said. “But of course, this action comes at our monetary policy meetings. “

The Bank has forecast the UK inflation rate to rise above 4% by the end of the year, more than double its target, as the global economy reopens from its lockdowns of Covid-19, causing shortages of supplies and personnel, and the price of energy skyrocketing.

Investors are speculating that it could become the first of the world’s largest central banks to raise rates, this year or in early 2022.

Bailey said demand for workers in the UK has been higher than expected and the number of younger and older workers leaving the labor market has increased. “I am concerned about the growth in the labor supply,” he said.

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But Bailey said he didn’t believe there was a “general pattern of pressure in the labor market” as wages rose sharply in some sectors but less in others.

He also said there were lessons for governments seeking to prevent future supply chain shocks in how financial regulators responded to the shock of the 2007-09 global financial crisis, including regular stress tests.

“I’m not saying we have the magic answer to supply chains at all levels, but I do think there are lessons we’ve learned, in terms of resilience, that can be usefully adapted and used and translated. in other markets, especially for example when I look at the energy supply, ”he said.


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