Published on : 20/08/2022 – 13:33
The Bank of England is criticized from all sides: by economists, members of the British government, former leaders of the bank who judge its inertia to curb galloping inflation in the United Kingdom. This has reached more than 10%: unheard of for 40 years, and far from the bank’s 2% objectives. The situation should worsen in the coming months, warns the British institution.
« Clearly something went wrong “, castigated Kwasi Kwarteng, the British Minister for Business and Industry, on the Sky News television channel on August 5, 2022. Like others, he thinks that the Bank of England should have abandoned its accommodative policy sooner and raised its interest rates when the UK economy was stronger and less weighed down by inflation.
Faced with these criticisms, the governor of the Bank of England Andrew Bailey recalls that the institution raised its rates at the end of 2021, well before the American Federal Bank and the European Central Bank.
The situation will get worse
Too slowly according to critics because the explosion of prices due to the energy crisis will worsen and reach 13% within a few months in the United Kingdom. This situation has been causing for weeks strong mobilizations in the country for lower prices and better wages.
A rise in rates, according to critics of the Bank of England, makes borrowing more expensive: people borrow and invest less. This prevents inflation from swelling and causing more wage claims. However, this opinion is not shared by all economists.
Supply issues
In addition to the energy crisis due to the war in Ukraine, which is also affecting the European Union, the United Kingdom is suffering from supply problems and a shortage of labor exacerbated by Brexit.
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