Britain is facing the “main concern” of the “apocalyptic” global rise in food prices caused by Russia’s invasion of Ukraine, said the head of the Bank of England.

Andrew Bailey warned of a “very big income shock” for households and acknowledged that he felt “helpless” in the face of rising inflation.

His comments came when Tory veteran MP Michael Fabricant called on Chancellor Rishi Sunak to increase benefits in line with inflation, and due to concerns the energy regulator plans to revise the price cap on bills every three months instead of every six.

Mr Bailey championed the Bank’s monetary policy and said there could be a further rise in food spending if Ukraine, a major exporter of agricultural products, fails to ship wheat and oil from its warehouses due to the Russian blockade.

“I’m sorry it was apocalyptic at the time, but it’s a serious concern,” Bailey said Monday, noting that wheat prices alone have risen just under 25 percent in the past six weeks.

Britain is already in a “bad situation”. inflationsaid Mr. Bailey. The cost of living It was driven by a multitude of global factors that could not predict bank rates, he insisted.

These include war in Ukraine and the Chinese government’s latest response to the wave of Covid infections in the country, which included harsh, cost-effective blockades. The result has been a sharp and sudden rise in world energy prices, which has raised the cost of living in the UK.

“I’m not at all happy about it; it’s a bad situation, ”Mr. Bailey said, noting that inflation is expected to reach 10 percent later this year.

He was answering questions from the chairman of the Treasury’s selection committee, Mel Stride, an MP on whether he “slept behind the wheel” when it came to rising interest rate pressure.

About 80 per cent of the forces driving inflation in the UK are driven by global circumstances, Mr Bailey said. “We can’t do much by about 80 percent,” he added. “We have to acknowledge the reality of the situation we are facing.”

Another factor included in the remaining 20 percent of the problems affecting rising prices was the reduction in the workforce after the pandemic.

“The scale and duration of the fall was very unusual,” Mr Bailey said, adding: “I must say that these are very good and rather difficult judgments.”

Inflation – the rate of price growth in the economy – is currently 7 per cent, and the Bank of England predicts it could reach 10 per cent this year. This is comparable to the Bank’s 2 per cent target, which is central to a key part of its mandate, often referred to as “price stability”.

One of the high-ranking ministers said of the bank: “It has one job – to keep inflation at around 2 percent – and it’s hard to remember when it last reached its goal.”

The second added that high-ranking officials “are now being interrogated [the Bank’s] independence, ”suggesting that some may see arguments for greater political influence over the Bank, which became the independent Gordon Brown, proclaimed immediately after he became chancellor in 1997.

However, if there are signs of weakening consumer confidence, the Bank may have to reconcile the need to curb inflation with the need to avoid a recession. This is because higher interest rates can often act as a handbrake for economic growth.

Earlier this month, the Bank warned that severe living standards could cause a sharp slowdown in the economy.

Ahead of Monday’s evidence session, Ed Smith, one of Rathbone Investment Management’s chief investment officers, said the recession forecast in the UK was worse than in other major economies. As a result, the bank is more likely than its international counterparts, including the US Federal Reserve, to “stop tightening sooner than investors expect.”

“Changes in government spending and taxation are a bigger hurdle in the UK than in the US. Meanwhile, the cost of living in the UK looks more intense, and British households have not amassed savings to the same extent during the acute phase of the pandemic, ”he said.

“Consumer confidence in the UK has also fallen recently, and there have been some worrying signs of consumer data weakness, such as retail sales and new car registrations,” Mr Smith added.

https://www.independent.co.uk/news/business/news/inflation-cost-of-living-interest-rates-b2080117.html

Previous articleUkrainian fighters, who lasted two months at the Azovstal plant, finally released
Next articleNew app “Think before you link” so as not to deceive officials, businesses and scientists with foreign spies | Science and technology news