Bailey (BoE): There is a risk that inflation will integrate into the British economy at this high level

LAST UPDATE 12:50

The governor of the Bank of England, Andrew Bailey, said there was a “very clear” risk that very high inflation would be integrated into the British economy if there was a cycle of higher prices pushing up wages.

“It’s not just about setting wages, it’s about setting prices, it’s about both,” Bailey told lawmakers.

“There is also clearly an upside risk there. The upside risk comes from secondary factors,” he added.

The BoE raised interest rates to 0.5% this month from 0.25%, but four of the nine members of the Monetary Policy Committee voted in favor of a larger increase to 0.75%, the first such increase. since 1997.

UK inflation hit a 30-year high of 5.5% in January, and the BoE expects inflation to peak at 7.25% in April when the 54% increase in household tariffs takes effect.

Investors have fully appreciated another 25 basis points increase in interest rates at the next BoE meeting on March 17th.

Bailey also said that members of the central bank’s monetary committee did not have much disagreement about the level at which interest rates should eventually reach, despite being divided this month over the speed of growth.

“It is important not to put too much emphasis on whether we had a different view on the level we expected to reach, as opposed to the pace at which we are getting there,” he added.