Bank of England Governor Andrew Bailey dismissed criticism that the institution failed to act quickly enough to quell inflationary pressures
LONDON — Bank of England Governor Andrew Bailey on Monday dismissed criticism that the institution failed to act quickly enough to stifle inflationary pressures, telling a parliamentary committee that monetary policy makers don’t weren’t able to predict wars.
Bailey has come under heavy criticism in recent months as the UK’s annual inflation rate soared to 7%, the highest in more than 30 years. But Bailey said it was only in hindsight that the unprecedented sequence of shocks to the economy – including Russia’s invasion of Ukraine in February and the lingering COVID-19 pandemic – would have could be handled differently.
“We can’t predict things like wars – it’s in no one’s power,” he told the House of Commons Treasury Committee. “I don’t think we could have done anything differently. We could not have seen a war with Ukraine. There is also another stage of COVID, with the situation in China, which seems to affect the country more seriously.
The central bank first delayed raising interest rates when consumer prices started to rise last summer, arguing that inflation was largely due to short-term external pressures and would return quickly. at the target level.
Inflation has accelerated steadily since July, the last time it was at or below the bank’s 2% target.
The central bank finally raised its key rate in December, after keeping it at a historic low of 0.1% for the previous 21 months. After four consecutive increases, the rate now stands at 1%.
Senior lawmakers from the ruling Conservative Party have lambasted the bank in recent days, saying it should have acted faster to tackle inflation fueled by rising energy and food costs. Liam Fox, a former Cabinet minister, criticized the bank ahead of Monday’s hearing.
“It is the duty of central banks to protect the value of our money,” Fox tweeted. “Yet the @bankofengland has consistently underestimated the inflationary threat and the problem of excess money supply. The (Commons Treasury Committee) should launch a full scale inquiry as a matter of urgency.”
Bailey also warned of rising consumer prices, describing food inflation as one of the bank’s main concerns.
“One is the risk of a new shock in energy prices, which would come from the cutoff of (Russian) gas and distillates, such as products like diesel,” he said. “And then the one that I might sound rather apocalyptic about is the food.”
The governor said Ukraine had food in storage but could not get it out of the country, given the Russian attacks.
“It’s a major concern for this country and a major concern for the developing world,” Bailey said.
Follow all AP stories about the war in Ukraine at https://apnews.com/hub/russia-ukraine.