Bank of England boss Andrew Bailey chides chief economist Huw Pill over wage inflation spat
Bank of England Governor Andrew Bailey has slammed his chief economist over controversial comments suggesting that the British “should accept that they are worse off” amid galloping inflation.
Huw Pill made the argument in a podcast last month, reflecting the Bank’s view that by asking for wage increases to match rising prices, workers risk prolonging the spiral.
But that was widely condemned, and Bailey acknowledged that officials should be more sensitive to the tightness facing millions due to double-digit inflation.
“I don’t think Huw’s choice of words was the right one in that sense, I have to be honest, and I think he would agree with me,” the governor said. i
It was a rare public disapproval for a senior figure at the Bank, even though officials openly discuss often widely differing views on interest rates.
Crude note: Bank of England chief economist Huw Pill (pictured) suggested Britons ‘should accept that they are worse off’ amid galloping inflation
At the time Pill, who is being paid £190,000, made the remarks, a senior City figure suggested he should ‘talk the brain before opening his mouth’.
When asked if the bank’s officials should lead by example, Bailey revealed that he was not taking a raise.
But he refused to criticize large payouts for City managers. “These things are decided by firms, not us,” the governor said.
Bailey’s response to Pill’s comments came as the Bank announced its latest rate hike of 0.25 percentage point, to 4.5 percent, the highest rate since 2008.
The rate has risen rapidly since December 2021, when it stood at 0.1 percent, as officials battle to push inflation back from above 10 percent to the 2 percent target.
But yesterday it warned the fight would last longer than previously thought, thanks to worse-than-predicted increases in food costs.
The Bank had previously forecast inflation to fall below 4 percent by the end of this year, but now expects it to still be above 5 percent by then.
Bailey insisted he would offer no guidance on whether interest rates would rise again amid speculation that counterparts at the US Federal Reserve are ready to suspend their rises.
He insisted: “We need to stay on track to ensure that inflation falls all the way back to the 2 percent target.”
The pound traded at its highest level against the dollar since April last year ahead of the rise.
It peaked briefly yesterday, but was down more than a penny by the end of the session, at around $1.25.