Bailey hot under the collar over price rises as City warns BoE inflation will scale to double its target

The governor of the Bank of England is deeply agitated by red hot inflation in the UK despite voting in favour of leaving interest rates unchanged at a record low.

Responding to a grilling by MPs, Andrew Bailey said he was “very uneasy about the inflation situation”.

Inflation is “not of course where we want it to be,” Bailey warned.

Price rises in the UK have been fuelled by global supply chains buckling under the weight of unusually high demand for goods, a trend that was triggered by the pandemic shutting off spending opportunities for services.

However, a rebalancing in spending patterns is not happening “as rapidly as probably we thought it would… causing inflation to be higher,” Bailey warned.

City economists are predicting the Office for National Statistics’s latest inflation reading, published on Wednesday, could reach four per cent, double the Bank’s target.

The Bank’s new chief economist, and Andy Haldane’s successor, Huw Pill highlighted that officials on Threadneedle Street need to balance reining in inflation and accommodating the economic recovery.

“If we act prematurely, there is a danger we derail some of the recovery which is still, in some respects, quite fragile.”