The governor of the Bank of England has responded to criticism that his decisions have led to the highest inflation in 40 years.

Andrew Bailey said he “rejected” the argument made by his predecessor in an interview with Sky News that the Bank of England and other central banks, including the Federal Reserve and the European Central Bank, shared responsibility for the cost of living crisis.

Lord King, who was governor from 2003 to 2013, claimed they fed rising inflation printing hundreds of billions of pounds and dollars under so-called quantitative easing (QE) during the pandemic to support its economy.

He suggested that the consequences of the so-called free policy aimed at stimulating money supply during times of stress are a “failure of the economist’s profession”, as they are now combined with external shocks such as record energy prices. , inflict the biggest financial pain for households since 1982.

But Mr Bailey told an audience at Austria’s central bank: “I reject the argument that in our response to COVID the bank’s monetary policy committee allowed demand to spiral out of control and thus fueled inflation.

“The facts simply do not confirm this,” he said.

He pointed to the reduction in the number of labor as a much more likely cause of high inflation.

The latest official figures show that vacancies continue to be at record levels – working people are clearly looking for better pay to better protect themselves from rising living costs as the total transition from work to work has risen to a record high of 994,000 between January and March.

Mr Bailey also dismissed the idea that the economy was too hot because economic growth “was only 0.6% above pre-COVID levels,” the governor said.

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“Banks have printed too much cash”

He said that if there had been no pandemic, the figure would probably have been much higher.

“We have a very tough labor market.

“But it’s not like a story about rapid demand growth,” Mr. Bailey said.

“The workforce has shrunk by about 1% since the start of COVID-19. It’s more like the impact of labor supply.”

Mr Bailey also reiterated hints that the bank could further raise interest rates to help fight inflation.

“So far, we have raised the official rate four times and made it clear that in order to reduce inflation to the target, we are ready to do it again based on the assessment at each of our meetings,” he said.

“The Bank of England, as always, will make monetary policy decisions to ensure that inflation targets are met in the medium term,” he said.

https://news.sky.com/story/cost-of-living-bank-of-england-chief-hits-back-at-criticism-it-has-stoked-inflation-12619847

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