Bank of England chief: I’m uneasy about inflation but we are a long way from the 1970s
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.
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‘Interest rate rise wouldn’t tackle supply issues’
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”.
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‘Supply shocks’ caused by COVID and Brexit
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.
The co-founders of the Ben & Jerry’s ice cream brand are demanding the brand be given its independence back amid a long-running row with its current UK owner.
Ben Cohen and Jerry Greenfield have written an open letter demanding that it be “released” from its parent firm.
Mr Cohen told Sky News he would give back the money he received in the sale of the business to Unilever in 2000 if it meant the brand could be independent.
Ben & Jerry’s is set to spin off all its ice cream brands under The Magnum Ice Cream Company (TMICC) name in a deal set to be fully completed before the end of the year.
“You’re saying, would I give it back? Absolutely. If we could still have Ben and Jerry’s independent, any day”, he said.
“It seems like the board of Magnum has been Trumpified”, Mr Cohen told Sky News as he protested the “silencing” of Ben & Jerry’s social mission.
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The consumer goods firm Unilever has never enjoyed an easy relationship with Ben & Jerry’s – a brand known for its activism on many political and social issues.
As part of the original merger deal, an independent board was set up to protect the ice cream brand’s mission.
But a series of disputes have followed.
The most high-profile spat came in 2021 when the US brand took the decision not to sell ice cream in Israeli-occupied Palestinian territories on the grounds that sales would be “inconsistent” with its values.
Ben Cohen in London
Unilever responded by selling the business to its licensee in Israel.
The independent board is currently locked in a legal dispute with Unilever, claiming in March that its then-chief executive David Stever was improperly sacked.
Ben Cohen. File pic: AP
For its part, Unilever has always argued that it “reserved primary responsibility for financial and operational decisions” as owners of Ben & Jerry’s.
In another example of the frostiness between them, an ice cream flavour launched in support of Democrat presidential candidate Kamala Harris went down badly in London.
Ben & Jerry’s claimed Unilever had demanded it stop public criticism of Donald Trump.
Mr Cohen was one of seven people arrested during the Senate protest in May
Ben Cohen himself was arrested earlier this year over a protest in support of Gaza during a US Senate hearing.
He and Mr Greenfield intervened in the ownership row as TMICC briefed investors on their plans at a so-called capital markets day. They say the independent board and many consumers and employees “no longer support the trajectory on which it is set”.
Mr Cohen, who is attending the event to protest, said: “Ben & Jerry’s was founded on a simple but radical premise: that our business could thrive and make outstanding products whilst standing up for progressive values.
“We fought to ensure our social justice mission was protected by Unilever when the company was acquired, but over the past several years, this has been eroded, and the company’s voice has been muted.
“We won’t be silent anymore. Authenticity has always been at the very heart of what we do, and stripping this away risks destroying the very value of Ben & Jerry’s. We urge the board and potential investors to rethink the inclusion of Ben & Jerry’s in Magnum’s future makeup and establish a Free Ben & Jerry’s.”
The new ice cream division, which will also comprise other brands such as Wall’s, is based in the Netherlands and will have a primary stock market listing in Amsterdam.
A spokesperson for The Magnum Ice Cream Company told Sky News: “Ben & Jerry’s is a proud part of The Magnum Ice Cream Company and is not for sale.
“We remain committed to Ben & Jerry’s unique three-part mission – product, economic and social – and look forward to building on its success as an iconic, much-loved business.”
Unilever has also been contacted for comment.
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