Andrew Bailey urges price hike restraint

Bailey warned parliament’s treasury select committee on 24 February of a risk of combined price and wage rises entrenching inflation into the UK economy. This would compel the Bank of England to raise interest rates, and risk stalling economic growth.

He previously told the London Stock Exchange on 5 February that “the deepest recession since 1709” makes it crucial to “keep financial conditions sufficiently accommodative” to mitigate the shock, and to support the flow of credit to businesses.

Nevertheless, the governor’s approach towards stabilising inflation met with disapproval from Downing Street, after Bailey told the BBC on 7 February “we do need to see restraint in pay bargaining, otherwise it will get out of control.”

The prime minister’s official spokesperson countered his remark, stating: “We obviously want a high-wage, high-growth economy, and we want people’s wages to increase.”

Seeking to contextualise his position, Bailey told Wednesday’s select committee that his comments were “in the context of large pay rises”, and “if everybody tries to get ahead of the shock we’ve had from outside, then we’ll get the second-round effects and it will get worse.”

He confirmed that his point about restraint also applies to firms planning price hikes.

Angela Eagle, Labour MP, questioned Bailey on bank bonuses, stating “we’re in the middle of a huge bonanza for banker bonus payouts”.

Her comments come as Barclays revealed it handed out £1.9bn in bonuses for 2021, up from £1.6bn in 2020, following similar payouts from HSBC.

Bailey stated that “the same point holds about restraint for everybody”. He urged banks to limit these bonuses and to “please reflect on the economic situation we’re in”.