London Daily

Focus on the big picture.
Thursday, Jul 10, 2025

Don't ask for a big pay rise, warns Bank of England boss

Don't ask for a big pay rise, warns Bank of England boss

Workers should not ask for big pay rises, to try and stop prices rising out of control, the Bank of England governor has told the BBC.

Prices are expected to climb faster than pay, putting the biggest squeeze on household finances in decades.

Andrew Bailey said the Bank raised rates to 0.5% from 0.25% to prevent rising prices becoming "ingrained".

Asked if the Bank was also implicitly asking workers not to demand big pay rises, he said: "Broadly, yes".

Inflation is on course to rise above 7% this year, leaving households facing the biggest income squeeze in decades.

Pay increases are not expected to keep pace with rising prices.

Post-tax incomes are forecast to fall 2% this year, after taking into account the rising cost of living.

This represents the biggest fall in living standards since records began in 1990.

Workers are currently enjoying pay rises of just below 5% on average, according to a Bank survey.

However, in sectors with big labour shortages, such as IT, construction and engineering firms have started paying workers "ad-hoc" bonuses in order to keep them.

Mr Bailey said that while it would be "painful" for workers to accept that prices would rise faster than their wages, he added that some "moderation of wage rises" was needed to prevent inflation becoming entrenched.

Mr Bailey said: "In the sense of saying, we do need to see a moderation of wage rises, now that's painful. I don't want to in any sense sugar that, it is painful. But we need to see that in order to get through this problem more quickly."

In the year from 1 March 2020, Mr Bailey was paid £575,538 including pension.

That is more than 18 times higher than the median annual pay for full-time employees of £31,285 for the tax year ending 5 April 2021.

Inflation, as measured by the consumer prices index (CPI), is expected to peak at 7.25% in April, and average close to 6% in 2022.

This would be the fastest price growth since 1991 and is well above the Bank's 2% target.

There are also increasing signs of broader price pressures across the economy.


Prices of household appliances such as fridges climbed almost 10% over the past year.

Goods shortages also meant retailers were offering fewer bargains in the January sales compared with previous years.

The price of services such as getting a haircut or a trip to the vet had also become more expensive as companies passed on higher wage costs to consumers, the Bank warned.

Mr Bailey described the jobs market as "extraordinarily tight", adding that labour shortages were the "first, second and third thing people want to talk about" when he visited businesses across the country.

The Bank's Monetary Policy Committee that sets interest rates suggested that further rate rises would be needed "in the coming months" if the economy continued to bounce back from the slowdown caused by the Omicron variant,.

However, Mr Bailey cautioned that the economic outlook was particularly "uncertain"

This may not necessarily be the start of a "long march upwards" in interest rates, he added.


The worst squeeze on the income of households since 1990 is what the Bank predicts.

Record energy bill rises from April will take inflation to a peak of 7.25% in April, more than treble the Bank's normal target.

Some have called it "Black Thursday" for living standards.

In raising interest rates again and signalling more rate rises in the coming months, and nearly voting for even more on Thursday, the Bank is putting the nation on the couch in an exercise in mass psychology.

Inflation rises can be self-fulfilling. If workers, consumers and businesses expect 7% rises to persist, they will pre-emptively put up prices and ask for wage rises that then bring this about.

What the Bank is trying to do is to confine what is happening right now to being a one-off shock.

To stop the inflation becoming "ingrained" as Bank governor Andrew Bailey put it today.

There is a presentational issue here.

In ordinary circumstances interest rates are raised to temper booming or bubbly growth - to take the punch bowl away from the party. But there is no punch bowl. There is no party.

In fact the Bank lowered its forecasts for growth of the economy to 3.75% from 5%, even though Omicron was not as damaging as feared.

The Bank's answer is that this series of rate rises will be enough to stop a spiral of inflation, but will not go so high as to kill off the recovery. It is a delicate balancing act indeed.


Don't ask for a big pay rise, warns Bank of England boss


Newsletter

Related Articles

0:00
0:00
Close
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
US Imposes New Tariffs on Brazilian Exports Amid Political Tensions
Azerbaijan and Armenia are on the brink of a historic peace deal.
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
×