BoE: Rising inflation will hit Britain harder than any other major economy

Rising inflation will hit Britain harder than any other major economy during the current energy crisis, the Governor of the Bank of England (BoE) has warned.

The British economy is likely to weaken earlier and more sharply than others as a result of the energy price shock facing all European economies.

The situation is further exacerbated in Britain by the “structural legacy” of COVID-19 in the labor market, as companies struggle to address labor shortages.

“Unfortunately there will be a further acceleration in British inflation later this year because this is a product of the way the energy price ceiling interacts with the energy prices we have seen over the last few months,” Bailey told a news conference on Wednesday. European Central Bank (ECB) in Sintra, Portugal.

“I think the British economy is likely to weaken rather early and somewhat more than others,” he said.

The governor of the Bank of England added that in the most recent data available he saw a shift in the causes of high inflation from high commodity prices, supplies of which were in short supply after the new coronavirus pandemic, in goods and services affected by the Russian invasion of Ukraine.

To tackle inflation, the Bank of England needs to choose to raise interest rates by half a unit.

“There will be times when we need to do more. We are not there yet for the next meeting. We are still a month away, but this is on the table. However, you should not assume that it is the only thing on the table. “This is the focal point,” he added.

“The key for us is to bring inflation back to our goal and that is what we will do,” Bailey said.

The Bank of England has so far raised interest rates five times since December.

SOURCE: AMPE