BoE chief Bailey warns UK to wait 2024 before cost pressure eases off
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Forecasts have shown prices are likely to increase faster than worker pay, tightening the massive financial squeeze already being felt by millions of households. Bank of England (BoE) boss Andrew Bailey defended the decision to raise interest rates from 0.25 percent to 0.5 percent. He told the BBC: “What we can do is try to prevent inflation spreading and becoming more ingrained in the system.”
When asked if the BoE is also advising workers not to demand big pay rises, Mr Bailey replied: “Broadly, yes.
The BoE governor admitted while this would be “painful” for workers to accept that prices would rise faster than their wages, he insisted the need for some “moderation of wage rises”.
He continued: “In the sense of saying, we do need to see a moderation of wage rises, now that’s painful.
“I don’t want to in any sense sugar that, it is painful.
“But we need to see that in order to get through this problem more quickly.”
In yet another major blow for UK households, inflation is set to surge beyond seven percent this year, leaving millions of people faced with the biggest income squeeze in several decades.
There is forecast to be a two percent fall in post-tax incomes this year, after taking into account the rising cost of living.
That would be the biggest fall in living standards since records began more than 30 years ago.
A recent survey from the Bank showed workers are currently enjoying pay rises of just below five percent on average.
Inflation is expected to peak at 7.25 percent in April, and will average close to six percent in 2022.
That would result in the fastest price growth since 1991 and a long way above the two percent target set by the Bank.
There are also growing fears of wider price pressures making their presence felt across the UK economy.
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For example, the price of household appliances such as fridges have jumped almost 10 percent over the past year, while a huge shortage in goods has seen retailers offer fewer bargains in the recent January sales.
The Bank has also warned then ;rice of a number of other common services, such as getting a haircut, have also become pricier as firms pass on higher wage costs to consumers.
The jobs market has been described as “extraordinarily tight” by Mr Bailey, who said labour shortages were the “first, second and third thing people want to talk about” during recent visits to businesses throughout the country.
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