Bank of England Governor Andrew Bailey has rejected claims by Conservative MPs that the UK’s central bank was acting too slowly to deal with rising inflation and defending its operational independence and mandate.
Asked on Friday whether he would remain in office regardless of changes made by outgoing Prime Minister Boris Johnson’s successor, Bailey told BBC Radio 4’s. Today program: “I’ve made a commitment, it’s an eight-year term and that’s part of the fabric of the Bank of England’s independence.”
He added: “Central bank independence is critical in our view. Our job is to bring inflation back to target.”
Bailey has been criticized since inflation rose to a 40-year high of 9.4 percent in June. In response, the BoE raised interest rates by 0.5 percentage point to 1.75% on Thursday, the largest increase in 27 years.
It also revised its inflation forecast upwards, saying it would hit 13 percent by December, and forecasting the economy would enter a prolonged recession by the end of this year.
Attorney General Suella Braverman, a key ally of Tory leadership contender Liz Truss, told Sky News that if she became prime minister, the secretary of state would see if the BoE was “fit for purpose in terms of its complete exclusionary independence over interest rates”.
Bailey argued that the BoE’s independence was not really in question.
“If you look, I don’t think there is a great desire in this country to question the independence of the central bank,” he said. “I am very happy to discuss with the new administration the details and nature of the current regime, how it works and how the BoE operators and how we are accountable,” he added.
Bailey dismissed allegations that the BoE was slow in raising rates, saying that before December, uncertainty over the more than 1 million people still on furlough meant a rate hike would boost the UK’s fragile post-pandemic economic recovery. derail.
To those who argued that interest rates should have risen sooner, Bailey said, “I’m sorry, I disagree.”
Instead, he said that “what has happened is that there has been a series of major supply-side shocks, most of them outside”.
“I would challenge anyone to sit here two years ago and say, ‘There is going to be a war in Ukraine,’” he added.
He reiterated that while most of the inflationary pressures came from rising gas prices following Russia’s invasion of Ukraine, raising rates was necessary to avoid embedding high inflation.
“If Everyone Tried to Beat” [inflation], it doesn’t come down, it gets worse. . . in that world, it is the least fortunate that are most affected. That’s something we should all be very aware of,” Bailey said.
He also ignored allegations that excessive quantitative easing caused the historically high inflation, saying, “If that caused the current inflation, then in my opinion it would be the case that domestic demand in this country would be much stronger than it is.”