Andrew Bailey, Bank of England Governor admits to being’very uncomfortable’ with the spike in inflation. However, he said it was a close call for him not to raise interest rates starting November

  • Andrew Bailey stated that he was’very concerned’ by the rise in inflation rates in the UK. 
  • His remarks at the beginning of November were’very close’ and he said that it would be difficult to increase interest rates.
  • The Bank of England has set a target of 2% for inflation, but inflation will rise to 5% by next year.

Andrew Bailey, Bank of England Governor, admitted today that he’s’very nervous’ about inflation spikes. 

This month, the Bank’s Monetary Policy Committee made a decision to keep interest rates frozen. 

Bailey acknowledged that this decision was not easy, but there is growing concern that the Bank may raise interest rates over the next few months in order to address rising prices. 

Bank of England Governor Andrew Bailey today admitted he is 'very uneasy' about spiking inflation levels

Andrew Bailey, Bank of England Governor, admitted today that he’s’very uncomfortable’ with the rise in inflation.

The Office for Budget Responsibility has forecast inflation rising above four per cent in 2022

Inflation is predicted to increase above four percent by the Office for Budget Responsibility in 2022, according to their forecasts

Consumer Prices Index inflation inflation was at 3.1% for the twelve months ending September.

According to the Office for Budget Responsibility, it anticipates that inflation will reach five percent next year. This is far higher than what Bank of England has set for two percent. 

Bank of England has stated repeatedly that they expect elevated inflation to be temporary. They predict a return back to target over the next several years. 

In an interview with the Treasury Select Committee, Bailey answered questions about his concern over inflation. 

He replied: ‘I am very uneasy about the inflation situation… I want to be very clear on that.

It isn’t the right course to get inflation over target.

The “On the [interest rates]It was not a decision that I made, but it was very close in my mind. However, I only speak for me and will be happy to discuss the thinking behind my decision. This is evident in the close call. 

Bailey stated that he thinks it is sensible to wait and see how September’s furlough will impact the economy before deciding to raise interest rates. 

‘You can make the argument for doing it now, it is a very closely balanced argument,’ he said. 

‘I felt that on balance for me there was something to be said for waiting to see this evidence on the labour market from the official data which we will start to get tomorrow, interestingly.’ 

Although many analysts had predicted that interest rates will rise in November, the Monetary Policy Committee has voted to maintain the current rate at 0.1%. 

The Bank however stated an increase was likely to occur in the “coming months” to temper price rises.  

A seven-to-two vote was cast by the committee in favor of the rate being kept at 0.1%. The committee voted against two members who called for an increase to 0.25 percent.

Mr Bailey said at the time: ‘The Committee judges that… it will be necessary over coming months to increase Bank Rate in order to return CPI (Consumer Prices Index) inflation sustainably to the two per cent target.’ 

He wouldn’t be drawn on today’s meaning of ‘coming month’ as he stated that the committee meets six times a week and that ‘every meeting’ is active.