Bank of England governor ‘very concerned’ about rising inflation | Bank of England

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The possibility of an interest rate hike before Christmas looms further after the Bank of England governor told MPs that he was disturbed by the high rate of inflation in the UK.

Andrew Bailey gave evidence to the Treasury’s selection committee at large, saying he was “extremely uncomfortable” about the rising cost of living and came close to a vote to raise borrowing costs when Threadneedle Street last met to decide on interest rates earlier this month.

The governor sided with the majority when the bank’s Monetary Policy Committee (MPC) voted 7-2 to keep interest rates on hold at 0.1%, but made clear he might change his mind at the next meeting in December.

“All meetings are underway,” he said, referring to the possibility that the World Bank will start tightening policy for the first time since the start of the COVID-19 pandemic. “We are in the area of ​​price stability.”

The bank currently expects inflation to peak at 5% next spring, well above the 2% target set by the government for the bank to achieve, but Bailey said he abstained from a vote on raising borrowing costs this month because he wanted more. Evidence of the job market after the holiday.

“I am very uncomfortable with the inflation situation,” he said. “I want to be very clear about that. Naturally, it’s not where we wanted to be, for inflation to be above target. In terms of the decision itself, it was a very close decision in my view.”

The governor said anecdotal evidence suggested that the furloughed system shutdown at the end of September did not lead to a significant rise in the unemployment rate. There will be two more official labor market updates from the Office for National Statistics ahead of the upcoming MPC meeting, the first on Tuesday.

Financial markets were unaware of the Monetary Policy Committee’s November decision to leave interest rates unchanged, which followed Bailey’s comments widely seen as indicating an increase was imminent.

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Bailey said neither he nor any of the other bank’s policymakers had promised a rate hike in November, but added that he wanted to make clear that the MPC took the need to hit the inflation target seriously.

“I thought it was very important that we put our feet up at this point,” he said in comments likely to reinforce the city’s current sense that borrowing costs will rise on December 16.

Michael Saunders, one of two MPC members who voted in favor of the November increase, said delaying the measure could lead to faster and more rapid interest rate hikes in the future, but said talk of a return to a 1970s-style wage-price inflationary spiral was irrelevant. its place. .

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