Speaking at a conference of central bankers in Portugal, Andrew Bailey said inflation was higher in the UK and would be maintained for longer than previously expected as rising petrol and gas prices sent household bills soaring. new highs. Bailey said he was determined to reduce inflation and was ready to use the Bank’s power to raise interest rates aggressively in response, although he added that it may not be necessary if price increases slow towards the end of the year. “I think the UK economy is probably weakening rather early and a bit more than others,” he said. “There will be circumstances in which we need to do more. We are not there yet for the next meeting. We are still a month away, but this is on the table. “But you should not assume that it is the only thing on the table – that is the key point.” The comments came as leaders of the world’s most powerful central banks warned that the global economy was facing a new period of persistently high inflation, freed from the coronavirus pandemic after decades of stability. The leaders of the US Federal Reserve and the European Central Bank have joined Bailey in saying that the era of low and steady inflation in advanced economies since the 1990s was unlikely to return to the wake of a succession of economic shocks. ECB chief Christine Lagarde said there were “forces unleashed” by the Covid pandemic, Russia’s war in Ukraine and the collapse of global supply chains that made it difficult to return to a world of low and steady inflation. . “I do not think we will return to this environment of low inflation,” he said. Speaking at a panel at the ECB’s annual policy forum in Sintra, Portugal, he said: “Many of the moves we have seen over the last 20 years have been based on globalization – breaking down supply chains, reducing costs, just in time. That has changed. And it will probably constantly change to a system we are not sure about. “ Along with Lagarde on the panel were Bailey, US Fed Chairman Jerome Powell and Augustine Carstens, head of the Bank for International Settlements. Powell said the post-pandemic economy has been driven by “very different forces” from the past decade. “What we do not know is whether we will return to something more or less similar to what we had before. We suspect it will be a kind of mixture. “ The Fed chairman said he was raising interest rates with the explicit aim of slowing growth in the world’s largest economy as he tried to tackle the effects of severe bottlenecks on supply and hot demand for inflation-boosting goods and services. “The goal is to slow down growth so that supply has a chance to be met. “We hope that growth will remain positive,” he said. Bailey said Covid had left a “structural legacy” in the UK labor market, where companies have struggled with labor shortages, and inflation would also be affected by the reshaping of international supply chains in response to geopolitical tensions and tackling of global warming. Together representing more than a third of the world economy and with more than $ 20 trillion (16 16.5 trillion) in assets on their balance sheets, central bankers warned borrowers of aggressive interest rate hikes to combat the inflation. Powell said it was the job of central banks to prevent a permanent transition to a “higher inflation regime” after a series of shocks. “There is a clock here,” he said. While warning that there was evidence of a slowdown in economic growth in Britain, Bailey did not rule out raising interest rates by 50 basis points at the next meeting of the Bank in August and said he had the option to take strong action. “ Subscribe to the Business Email daily email or follow the Guardian Business on Twitter at @BusinessDesk Giving details to the Treasury Department committee, economist Swati Dhingra, who sits on the Bank’s nine strong monetary policy committee (MPC) later this year, said the deteriorating growth outlook convinced her that a “gradual approach ”to raising interest rates was needed. At a hearing with lawmakers in the Treasury committee approving her appointment, the London School of Economics economist said she was ready to take a more aggressive approach to raising interest rates until she sees the latest evidence of consumer confidence, the which showed the largest drop in optimism recorded. “In retrospect, I think there is some room for a step-by-step approach,” he said. Three members of the MPC voted in favor of raising the central bank’s key interest rate by 0.5 percentage point to 1.5% at a meeting earlier this month, while the majority supported a more modest increase of 0.25 points.
