Bank of England: We must see action by lowering inflation

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July 10, 2023, 14:06 GMT

Updated 13 minutes ago

Image source, Getty Images

It is “critical that we see the job through” the BoE governor will say in a speech to the financial world later on slowing price rises.

Andrew Bailey will say that bringing inflation down to 2% is “hugely important” because people “have to have confidence that their hard-earned money is maintaining its value”.

Right now, inflation, which is the rate at which prices are rising, is 8.7% — more than four times the bank’s target of 2%.

The Bank has been steadily raising interest rates in an effort to combat them.

Their base rate — which has a direct impact on borrowing costs for things like a mortgage and credit cards, but also affects savings rates — is now 5%, up from nearly zero 18 months ago.

Making it more expensive for people to borrow money and more worthwhile to save in theory makes people spend less and causes prices not to rise as quickly.

On Monday evening at the Mansion House event in London, Mr Bailey will say: “It is critical that we see the job through to completion, deliver on our mandate to bring inflation back to its 2% target, and provide an environment of price stability in which the UK economy can thrive.”

The BoE chief will also highlight that “tightness” in the labor market, with many firms struggling to fill positions, has contributed to price inflation being “more challenging than previously expected”.

“Both price and wage increases at current rates are not in line with the inflation target,” he adds.

But there were also accusations that some industries were profiting by overcharging customers to increase profits.

Before Bailey speaks, chancellor Jeremy Hunt will take to the podium to unveil plans for pension fund reform aimed at boosting economic growth.

Mr. Hunt will outline how the financial sector can help the government prioritize the development of the economy.

It will define “three golden rules” with procedures for opening capital to high-growth companies.

“Palace reforms” are designed to make the UK the most innovative and competitive financial center in the world, the Treasury said.

The chancellor is expected to promise “evolutionary rather than revolutionary” reforms to encourage pension funds to invest up to £50bn in high-growth businesses, particularly in financial technology and life sciences.

Mr. Hunt’s first rule would be that money “first and foremost” should guarantee the best possible outcomes for savers.

The chancellor is expected to say: “Secondly, we will always prioritize a strong and diversified denominational market.” “Those who invest in our bonds help fund vital public services and any changes should recognize the vital role they play.” Finally, Mr Hunt will insist that any changes to pension funds must boost rather than compromise the UK’s global competitiveness.

But the chancellor will say that “there can be no sustainable growth without first eliminating inflation, which stifles investment and undermines consumer confidence”.

He also promises that the government will continue to fulfill its “responsibilities to those who suffer the most” in the face of inflation.

About 400 people are scheduled to attend the event in the 18th century building.

After a protester targeted former chancellor George Osborne’s wedding at the weekend, Mansion House organizers said talks took place about security at the venue.

“We always have adequate safeguards in place,” said a spokeswoman for City of London, which is in charge of the venue.

Just Stop Oil said it made no comment about its activities prior to any demonstration.

The Treasury told the BBC it would not comment on security issues.

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