London Daily

Focus on the big picture.
Thursday, Jul 31, 2025

Bank of England chief: I'm uneasy about inflation but we are a long way from the 1970s

Bank of England chief: I'm uneasy about inflation but we are a long way from the 1970s

Andrew Bailey told MPs the decision not to hike interest rates earlier this month was a "very close call" with officials waiting to see how the jobs market had responded to the end of the furlough scheme.

Bank of England governor Andrew Bailey has admitted he is "very uneasy" about high inflation - but dismissed the idea that Britain could face a 1970s style wage-price spiral.

Mr Bailey was being questioned by MPs over the Bank's latest decision to leave interest rates on hold at a record low of 0.1% - surprising investors - despite inflation being higher than its 2% target and on course to top 5% in coming months.

Speaking to the Commons Treasury select committee, he defended the decision not to act by saying he wanted to first see an answer to the "puzzle" of what has happened to the jobs market after the furlough scheme ended in September.

Mr Bailey said: "I am very uneasy about the inflation situation.

"It is not of course where we want it to be, to have inflation above target."

Pressed on the danger of a wage-price spiral - where workers ask for more money to cover rising inflation and those demands result in higher prices, which then in turn prompts further wage demands, Mr Bailey said: "The structure of the economy, the structure of the labour market is very different to the 1970s.

"I tend to play down the comparison with the 1970s.

"Of course the inflation story in the 1970s was much worse, and persistent throughout the decade."

Mr Bailey said one reason was that, even though some employers were having to pay more to hire new staff "that doesn't necessarily translate at the moment into paying their existing staff more".

He added: "We are a very long way from the 1970s."

Interest rates were slashed to 0.1% early on during the pandemic in order to try to help the UK weather the coronavirus crisis which saw much of Britain's economic activity suspended.

But as the economy recovers and with inflation surging, there is pressure to increase rates - a lever traditionally seen as a tool by which central banks can keep a lid on price rises.

The Bank governor reiterated that the recent decision on interest rates was a "very close call".

On the one hand, he said, Britain's economic recovery was starting to slow partly due to supply chain strains dragging on growth.

But at the same time, the energy market and global goods prices were pushing up inflation.

Higher energy prices are among the factors behind rising inflation


Rehearsing his previously-stated rationale for not hiking interest rates, Mr Bailey said that doing so was not "going to supply more gas or supply more computer chips".

He added that by the time of the Bank's next interest rate meeting it would know more about what had happened to the one million jobs that were still on furlough when the scheme ended.

Mr Bailey was speaking a day ahead of official labour market figures which will for the first time give an indication of the impact of the withdrawal of that support on UK payrolls.

Inflation figures out on Wednesday, expected to show the rate of price increases at their highest level in nearly a decade, will also be closely watched by the Bank.

Michael Saunders, a member of the BoE's rate-setting committee who did vote for a rate rise earlier this month, backed the governor in agreeing that there was "no risk of a wage-price spiral".

But Mr Saunders told MPs his fear about not increasing interest rates now was that it would mean when they do eventually have to go up, the increase may have to be faster and potentially higher.

Newsletter

Related Articles

0:00
0:00
Close
Former Judge Charged After Drunk Driving Crash Kills Comedian in Brazil
Jeff Bezos hasn’t paid a dollar in taxes for decades. He makes billions and pays $0 in taxes, LEGALLY
China Increases Use of Exit Bans Amid Rising U.S. Tensions
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Procter & Gamble to Raise U.S. Prices to Offset One‑Billion‑Dollar Tariff Cost
House Republicans Move to Defund OECD Over Global Tax Dispute
Botswana Seeks Controlling Stake in De Beers as Anglo American Prepares Exit
Trump Administration Proposes Repeal of Obama‑Era Endangerment Finding, Dismantling Regulatory Basis for CO₂ Emissions Limits
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
A family has been arrested in the UK for displaying the British flag
Mel Gibson refuses to work with Robert De Niro, saying, "Keep that woke clown away from me."
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
The British propaganda channel BBC News lies again.
Deputy attorney general's second day of meeting with Ghislaine Maxwell has concluded
Controversial March in Switzerland Features Men Dressed in Nazi Uniforms
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
Thai Civilian Death Toll Rises to 12 in Cambodian Cross-Border Attacks
TSUNAMI: Trump Just Crossed the Rubicon—And There’s No Turning Back
Over 120 Criminal Cases Dismissed in Boston Amid Public Defender Shortage
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
Trump Announces $550 Billion Japanese Investment and New Trade Agreements with Indonesia and the Philippines
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Severe Flooding in South Korea Claims Lives Amid Ongoing Rescue Operations
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
CEO Resigns Amid Controversy Over Relationship with HR Executive
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
US Revokes Visas of Brazilian Corrupted Judges Amid Fake Bolsonaro Investigation
U.S. Congress Approves Rescissions Act Cutting Federal Funding for NPR and PBS
North Korea Restricts Foreign Tourist Access to New Seaside Resort
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
SpaceX Nears $400 Billion Valuation With New Share Sale
×