Workers asking for pay rises risk embedding inflation, says Bank boss
Workers should refrain from asking for inflation-matching pay rises, according to the governor of the Bank of England, who warned there was a risk of inflation becoming “embedded”.
Andrew Bailey, who added that he does not expect interest rates to settle at pre-financial crisis levels of about 5%, refused to be drawn on what an appropriate pay rise would be, a day after he warned inflation would hit 13% in October. The Bank’s inflation target is 2%.
“If everybody tries to beat inflation – and that is in both price-setting and wage-setting – it doesn’t come down, it gets worse,” he said, speaking to BBC Radio 4’s Today programme on Friday. “My key point is, if inflation becomes embedded and persistent, it gets worse. And the effects get worse.”
The UK is embroiled in a summer of strikes by workers in industries from rail and aviation to post and telecommunications as unions attempt to secure increases to allow members to keep wages in line with inflation levels running at a 40-year high.
Bailey acknowledged that as the UK heads into recession and inflation soars, it is the poorest who are being affected the most by the cost of living crisis.
“In this world it is the people who are least well-off who are worst affected because they don’t have the bargaining power,” he said. “That is something broadly that we all have to be very, very conscious of. There are a lot of people out there who are very badly affected by this inflation – all inflation affects people on low incomes badly – but this time particularly because it is concentrated in energy and food. Those are the essentials of life. There is a role in society to reflect on the fact there are people who do not have the same ability to offset the impact of inflation that are
Read more on theguardian.com
