- By Michael Race & Vishala Sri-Pathma
- Business reporter, BBC News
The Bank of England’s top economist says people in Britain need to accept that they are poorer or prices will continue to rise.
Huw Pill told a podcast in the US that there is a “reluctance to accept that, yes, we’re all worse off”.
In response to higher bills and other rising costs, he said, workers have responded by asking for a raise and businesses are charging more.
Inflation in the UK, the rate of increase, was 10.1% in the year to March.
The rate fell last month from 10.4% but that doesn’t mean prices are falling. That means they are growing at a slightly slower rate.
Inflation in the UK has been above the Bank of England’s 2% target for some time.
Part of the Bank’s job is to keep inflation at its target level. In response to rising prices, it raised interest rates, making it more expensive to borrow money.
In theory, this move is supposed to cause people to reduce spending, so demand for goods cools down and prices rise.
With households hit by soaring energy bills and food costs, many workers have asked for a pay rise to help ease the pressure on the budget.
Vacancies have fallen, but are still higher than they were decades ago, making people more aggressive when they demand a raise.
Although wages have increased, it has not matched inflation, which means people are getting worse.
‘Someone needs to accept that they’re worse’
Mr. Pill said wage hikers and businesses raised prices further fueling inflation and driving prices even higher throughout the economy.
“Somehow in the UK, someone needs to accept that they are in a worse situation and stop trying to maintain their real ability to spend by raising prices, whether through higher rates. higher wages or passing on energy costs to customers, etc,” he told the Beyond Unprecededed podcast. from Columbia Law School.
“What we’re facing now is a reluctance to accept that, yes, we’re all worse off and we all have to take our share; trying to pass that cost on to one of us. our fellow citizens and said: ‘We will get it, but they will also have to take our share’.
“The parcel delivery game is happening here, that game is the game that creates inflation, and that part of that inflation can exist.”
Mr Pill is not the first Bank of England official to warn of wage increases contributing to inflation.
His comments were immediately met with a backlash, with unions calling them “unfounded”. At the time, Downing Street and the Treasury Department stayed away from Mr Bailey’s comments.
Inflation was expected to fall below 10% last month but soaring food prices caused it to fall less than expected.
The British Retail Consortium said it expected food prices to start falling “in the next few months”.
But the retail industry body said there was a three to nine-month delay to seeing the price drop reflected in stores.