Bank of England boss urges firms to hold back price rises or risk higher rates

theguardian.com:

The Bank of England governor, Andrew Bailey, has called on businesses to hold back price rises, telling them that interest rates will need to rise again unless inflation falls.

Bailey, who was speaking after the central bank raised its base rate on Thursday to a 14-year high of 4.25% from 4%, said inflation was too high and the central bank would need to take further action unless it began to fall by the summer.

The warning came after the latest official data showed the annual rate of inflation unexpectedly rose to 10.4% in February, from 10.1% in January. The Bank of England’s official inflation target is 2%.

“We’ve got to get inflation down,” he said. “Inflation is too high at the moment. Now we think that it will fall sharply really from the early summer throughout the rest of the year. And we’re pretty confident about that.

“But it hasn’t come down yet and we had some news earlier this week which was a bit higher than we expected it to be, there were probably some temporary factors in there,” he said.

Speaking on BBC Radio 4’s Today programme, Bailey added: “I would say to people who are setting prices: please understand if we get inflation embedded interest rates will have to go up further,” he said.

“When companies set prices I understand that they have to reflect the costs that they face. But what I would say please is that when we are setting prices in the economy and people are looking forwards we do expect inflation to come down sharply this year and I would just say please bear that in mind.”

Last year, Bailey warned workers to restrain wage demands or risk further interest rates rises to prevent inflation becoming embedded. His comments caused a storm of protest from trade unions who argued that wage rises were well