Spring Statement: Rigby says Autumn inflation rise is ‘startling’
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Speaking today, Mr Bailey warned the UK is facing “a very large shock to aggregate income and spending”. In an event with Brussels-based think tank Bruegel, he added: “Unfortunately, there is more to come on inflation shock.” Mr Bailey noted the shock from energy prices was now worse than any single year in the 1970s, although he observed that, in this case, energy saw sustained years of price volatility. With the cost of living set to rise substantially this year, Mr Bailey predicted lower spending as a result would in the long run help control inflation, suggesting it would return to target in around two years.
The Bank of England has been trying to counter rising inflation through raising interest rates, with three consecutive hikes so far.
Risks to growth and a more uncertain global situation following Russia’s invasion of Ukraine have made the situation increasingly unclear.
The Bank is now left treading a cautious path between controlling inflation and avoiding damage to the UK growth and triggering a recession.
Speaking today, Mr Bailey admitted: “We are starting to see evidence of a growth slowdown.”
More to follow…
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