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Bailey says he’s unhappy about inflation but BoE not to blame

Bank of England Governor Andrew Bailey said on Monday he was “not at all happy” about the surge in inflation in Britain, but added that the central bank could not have done anything differently to prevent it.

“I should emphasise that I do not feel at all – obviously – happy about this,” Bailey told the Treasury Committee in the lower house of parliament. “This is a bad situation to be in.”

Asked if the BoE could have done something different, he said: “I don’t think we could. I don’t think we could foresee a war in Ukraine. Another factor that we’re dealing with at the moment is a further leg of COVID, which is affecting China.”

Bailey has come under criticism from some lawmakers from the ruling Conservative Party, which is feeling the heat for a cost-of-living crisis.

Britain’s consumer price inflation rate hit 7.0% in March and economists polled by Reuters expect it will leap to 9.1% for April, which would be its highest since 1982, when data is published on Wednesday.

Other central banks are also scrambling to cope with a surge in inflation, which they initially described as “transitory” when it began with the post-pandemic reopening of the global economy, before Russia’s invasion of Ukraine pushed energy prices even higher.

Inflation in the United States is running at an annual 8.3%, according to data for April published last week, down a touch from March’s 8.5% which was the biggest rise since 1981.

In the euro zone, inflation hit a record high of 7.5% in April, up from 7.4% in March.

The BoE earlier this month warned that Britain risks a double-whammy of inflation above 10% later this year and possibly a recession. It raised interest rates to their highest since 2009, hiking by quarter of a percentage point to 1%.

In his comments on Monday, Bailey said it was not out of place to describe COVID’s impact on demand patterns in Britain as “transient”, unlike in the United States.

Michael Saunders, one of three members of the nine-strong Monetary Policy Committee who voted for a bigger half-point rise this month, said British inflation expectations might have been a bit lower if interest rates had gone up sooner than they did.
Source: Reuters (Reporting by David Milliken and Farouq Suleiman Writing by William Schomberg)

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