Andrew Bailey is the ‘worst Bank of England boss’ says Malone
An adviser to the Chancellor called on the Bank of England to create a recession to bring down inflation. Economist Karen Ward warned there are signs the UK is falling into a price-wage spiral that is fuelling the cost of living crisis.
The JP Morgan strategist, who sits on the Chancellor’s economy advisory council, said that without weakness in the economy, inflation might stick around for much longer.
She said: “The difficulty for the Bank of England – I mean, no one envies them their job at the moment – is they have to therefore create a recession.
“They have to create uncertainty and frailty, because it’s only when companies feel nervous about the future that they will think ‘Well, maybe I won’t put through that price rise’, or workers, when they’re a little bit less confident about their job, think ‘Oh, I won’t push my boss for that higher pay’.
“It’s that weakness in activity which eventually gets rid of inflation.”
Last month Mr Hunt said he was comfortable with a recession to bring down rising prices “because in the end, inflation is a source of instability”.
Some economists have predicted the Bank will hike up interest rates today by 0.5 percent after inflation remained stuck at 8.7 percent.
Rob Morgan, chief investment analyst at Charles Stanley, said: “An increase to 4.75 percent is all but nailed on, but a shock-and-awe rise of 0.5 percent to five per cent cannot be ruled out.
“The Bank of England will likely maintain tight policy for the remainder of the year, meaning further interest rate rises and no significant rate cuts until 2024.”
The interest rate the Government pays on two-year gilts – essentially IOUs issued by the Treasury – to a fresh 15-year high of nearly 5.09 percent.
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In today’s Prime Minister’s Questions, Rishi Sunak conceded that inflation was placing significant pressure on household budgets.
The PM’s comments were in response to SNP MP Patricia Gibson, who asked him: “As inflation continues to outstrip pay awards, and tomorrow we expect to see the 13th consecutive rise in interest rates, will the Prime Minister tell the House by how much living standards have fallen during his eight months in office?”
The Tory leader and Richmond MP replied: “I have always been very clear, inflation is putting pressure on family budgets and that’s why the UK Government has taken decisive action to support families through this difficult time, including households in Scotland, who are receiving considerable support not just with their energy bills, but also the most vulnerable as well.”
The 43-year-old added that halving inflation was the right “economic priority” for the Government.
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