The reason for the cost of living crisis stems from rising inflation due to record high energy prices, supply chains disrupted after the COVID-19 pandemic and the consequences of extensive Western sanctions against Russia.
The Bank of England (BoE) expects inflation to increase to 10% by the end of 2022. BoE Governor Andrew Bailey has warned British households to face a huge income shock, according to Sputnik.
The worst inflation factor I have ever heard is food, the British media quoted Mr. Bailey as saying.
The Governor of the Bank of England explained to the UK House of Representatives' Finance Committee in the context of conservative lawmakers criticizing his reaction to rising prices due to inflation exceeding the government's 2% target.
Mr. Bailey said that the risk of food inflation continues to be a major concern for the country and a major concern for developing countries. He also denied allegations by House Finance Committee Chairman Mel Stride that the BoE was slowing the rate hike process.
The BoE sets an inflation target of 2% based on the consumer price index. However, official figures due on May 18 show that the annual inflation rate increased by more than 9%.
I was not happy at all and this was a bad situation, the BoE Governor replied when British lawmakers asked why the Bank did not act before December to prevent inflation from soaring by raising interest rates.
Mr. Bailey blamed global factors that contributed to the worsening cost of living crisis. He stressed that 80% of them were out of his control.
Disruption of supply chains after the pandemic and labor shortage are among the reasons. Governor Bailey admitted that the Bank has underestimated the number of people leaving the labor market after the COVID-19 pandemic. In addition, he also raised the trade consequences with post- Brexit Europe.
Governor Bailey admitted that the impact of Western sanctions on Russia over the war in Ukraine has pushed world rice prices and gasoline prices in the UK to record highs.
