Bank of England boss asks firms to show restraint when raising prices
The governor of the Bank of England has called on businesses to show restraint when raising their prices, after he came under heavy criticism for saying workers should not demand big pay rises to help manage inflation.
Andrew Bailey said that he recognised his call for workers to show restraint in the annual wage-bargaining process was unpopular, but warned that there were risks of an upward spiral for inflation taking hold.
However, in a conciliatory response to questions from MPs on the Commons Treasury committee, he said the same point also held true for firms planning price hikes to protect their profit margins.
“I’m not saying people should not take pay rises. I did make the point it was in the context of large pay rises. And my concern is the second-round effects. If everybody tries to get ahead of the shock we’ve had from outside, then we’ll get the second-round effects and it will get worse. That’s the problem,” he said.
Asked by the Labour MP Angela Eagle whether big companies and City bankers should exercise similar restraint, Bailey said: “The same point holds on restraint. [It] holds for everybody.”
The Bank’s governor said he was worried that current high rates of inflation, caused by soaring energy prices, could persist for longer if workers and firms tried to offset the shock by significantly raising their incomes. This could create “second round effects” to the initial shock from higher energy costs.
However, Bailey struggled to answer when asked how much he was personally paid compared to the median UK wage of £31,285. “[It’s] substantially higher. It’s somewhere over £500,000, I can’t tell you exactly what it was. I don’t carry that around in my head,” he told Eagle.
The Bank’s governor was paid £575,538
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