Inflation exceeds 10% in the United Kingdom, a 40-year high, well below the Bank’s 2% target.
It should rise further in the coming months, up to 13% according to the BoE, causing a purchasing power crisis that threatens to plunge many households into poverty.
“Clearly, something went wrong”lambasted Minister for Business and Industry Kwasi Kwarteng in an interview with Sky News, saying that “rates should have risen earlier”.
Critics that echo the message of the favorite in the polls to succeed Boris Johnson in Downing Street: Liz Truss has proposed to review the status of the Bank of England, whose independence dates from 1997.
Faced with these criticisms, the Governor of the Bank of England Andrew Bailey adopted a cautious response, repeatedly saying that he did not want to interfere in the debates of the Conservative party, even though he asserted that the credibility financial institution of the United Kingdom depended on the independence of its central bank.
He also recalled that the BoE had raised its rates from the end of 2021, earlier than the American Federal Reserve or the European Central Bank.
Inflation slowed slightly in July in the United States, to 8.5% over one year, and reached a new record in the euro zone at 8.9%.
The United Kingdom is suffering like the European Union from the energy crisis caused by the Russian invasion of Ukraine, but also from a disruption of supply chains and a shortage of workers exacerbated by Brexit.
But Mr. Bailey argues that a faster rise would have occurred in the midst of a resumption of Covid-19 contaminations, even if the Omicron variant did not lead to new hard confinements.
“It’s true, inflation is high this year, but the message is the same: in eight centuries, independence is the best way to have measured and stable inflation”affirmed on Twitter a member of the monetary committee, Jonathan Haskel, who accompanies his message with a table where the average inflation between 1997 and 2022 reaches barely more than 2%.
a bit slow
But disapproving comments aren’t exclusive to the campaigning Tory: former Bank of England officials say steeper hikes earlier, when Britain’s growth was stronger, would have averted a painful tightening and duration.
The Bank of England “doesn’t have an easy job right now, but they have tools, especially interest rates, and they’re a bit slow to raise them”criticizes Andrew Sentance, former member of the monetary policy committee.
These supporters of a strict policy would like to see the BoE raise its rates to slow borrowing and thus prevent inflation, for the moment fueled by the rise in energy prices, from leading to wage demands and rises in selling prices which would create an inflationary spiral.
“We were very, very slow to see the train coming out of the tunnel, a lot of people got knocked down and now we have to deal with the consequences”scolded Stuart Rose, chairman of the Asda supermarket chain and member of the House of Lords in the Conservative ranks.
But while he says the priority must be “killing inflation” rather than prioritizing growth, his sharpest arrows are for Ms Truss, whom he accuses of wanting to “throw money everywhere”, this which also promotes inflation.
The strict monetary policy is also not unanimous. Unions have criticized rate hikes that drive up the cost of mortgages, and some economists question the rate hike strategy.
“The relatively high rate of inflation in the UK is due to fiscal policy and Brexit” et “To knock out households by raising key rates quickly will not tackle the cause of inflation”judge Samuel Tombs, economist at Pantheon Macroeconomics.
According to him, the strategy of the British government, which lowered certain taxes instead of limiting the price of electricity as in France, for example, explains part of the difference in inflation between the United Kingdom and its neighbours.