Home Economy Bank of England governor defends delay in hiking interest rates

Bank of England governor defends delay in hiking interest rates

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The Bank yesterday increased interest rates to 1.75 percent – the highest in 27 years – while warning that Britain will plunge into a year-long recession this autumn.

Mr. Bailey said earlier interest rate rises could have damaged the UK’s economic recovery following the pandemic.

It came after claims from politicians, including Attorney General Suella Braverman, that the Bank was asleep at the wheel and allowed inflation to get out of control.

Mr Bailey told BBC Radio 4’s Today programme said he does not believe the Bank acted too slowly and that earlier action could have brought forward a recession.

“We don’t make policy with the benefit of hindsight,” he added.

“I’d challenge anyone sitting here a year, two years ago, to say there will be a war on Ukraine and it will have this effect on inflation.”

Analysis| Everything you need to know about the recession forecast and what it means

A recession is coming, according to the Bank of England, and it will be a long one, lasting more than a year.

The economy is not expected to shrink as sharply or as deeply as it did during the financial crisis in 2008, but inflation – the rate of price rises – is set to stay elevated through 2023. This will drive down living standards by the greatest rate on record, according to the central bank.

Borrowing is now more expensive with the Bank of England’s key interest rate raised to 1.75 percent on Thursday. And the buying power of money is set to be eaten into by inflation which it believes will hit more than 13 percent later this year.

.independent.co.uk

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