/ world today news/ The governor of the Bank of England said that he “very regrets” that inflation in the United Kingdom is rising amid forecasts that the cost of living could rise by 5%.
Andrew Bailey told the BBC that households were already feeling the impact of rising prices.
“I’m really sorry this is happening,” he said. “None of us want this to happen,” he added.
On Thursday, the Bank surprised financial markets by voting to keep interest rates unchanged.
She signaled earlier that the rate, currently at a historic low of 0.1%, would rise in the “coming months” as inflation is expected to pick up.
However, most members of the Bank’s Monetary Policy Committee voted to keep lending rates on hold at the November meeting, partly to see how the labor market coped with the end of the furlough scheme.
Inflation is currently ahead of the Bank of England’s 2% target at 3.1%. There are fears it could rise to 5% by next April.
Mr Bailey says: “Inflation is clearly what’s causing household incomes to erode. I’m sure they’re already feeling it in terms of prices going up.”
But he added that the Bank of England wanted to assess the impact of both domestic and global issues on the cost of living before deciding to raise rates.
Mr Bailey said the current environment was different as inflation was driven by global “supply chain shocks” rather than demand pressures in the UK economy.
The bank did not rule out a rate hike at its next meeting in December. The committee meets every six weeks.
Commenting on the decision not to raise borrowing costs this month. Mr Bailey says: “I’m afraid that raising interest rates won’t give us more gas.”
On Thursday, Mr Bailey was criticized by market analysts and some former members of the Reports Committee over the past month, who signaled that the interest rate would soon rise just to keep it unchanged. In response to this decision, the pound fell by as much as 1.5% against the dollar.
In October, the governor said the bank “will have to act” to curb accelerating inflation, although he did not specify when interest rates might rise.
Mr Bailey told the BBC the bank was concerned to see evidence that inflation had picked up over the summer. “We thought that most likely rates would have to go up, I think it was necessary to warn about that,” he said.
However, he added that “under no circumstances” did he or any of the members of the Monetary Policy Committee say that interest rates would rise in November.
But Danny Blanchflower, a former member of the ECB who is now an economics professor at Dartmouth College in the US, says the bank should be careful about making any predictions about where interest rates will go.
“We have no historical precedent for what is happening,” he said. “We’ve never seen a shock like this and the main thing we’re seeing at the moment is that the leave scheme has been scrapped, there’s going to be an increase in National Insurance taxes and poor benefits have just been cut.
“So the central bank really doesn’t have much of a clue what’s going on.”
He added: “It’s a really uncertain world and everyone needs to tread carefully. I’m afraid I have to say that you are very skeptical about what the Governor of the Bank of England and the Monetary Policy Committee have said. “
Translation: V. Sergeev
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