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.
Please use Chrome browser for a more accessible video player
‘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”.
Please use Chrome browser for a more accessible video player
‘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.
Shares in Elon Musk’s Tesla have reversed sharply over renewed concerns about his focus on the company’s recovery as he plots against Donald Trump.
Shares in the electric car firm plunged by more than 7% at the start of trading on Wall Street – taking about $71bn (£52bn) off its market value.
The stock has often come under pressure since Musk started his association with the president, latterly helping bring down federal government costs through a new department known as DOGE (Department of Government Efficiency).
Money latest: Call centre worker’s tips for getting discounts
But it is now suffering as their political relationship has soured.
Musk has publicly opposed the so-called “big, beautiful bill” – Mr Trump’s flagship tax cut and spending plans that received Congressional approval last week – since he left his DOGE role.
Musk wrote in a post on his X platform on 30 June: “It is obvious with the insane spending of this bill, which increases the debt ceiling by a record FIVE TRILLION DOLLARS that we live in a one-party country – the PORKY PIG PARTY!!”
Once the bill was passed, he created a poll on X, asking people if they would want him to launch the America Party.
Please use Chrome browser for a more accessible video player
Musk v Trump: ‘The Big, Beautiful Breakup’
He wrote on 4 July: “Independence Day is the perfect time to ask if you want independence from the two-party (some would say uniparty) system!”
The vote ended with 65.4% in favour of creating the party.
The formation of the America Party was announced the following day.
“By a factor of 2 to 1, you want a new political party and you shall have it! When it comes to bankrupting our country with
waste & graft, we live in a one-party system, not a democracy.”
“Today, the America Party is formed to give you back your freedom,” Musk posted.
Trump responded on his Truth Social account: “I am saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks.
“He even wants to start a Third Political Party, despite the fact that they have never succeeded in the United States –
The System seems not designed for them.”
Please use Chrome browser for a more accessible video player
Trump threatens to ‘put DOGE’ on Musk
Trump has previously threatened to go after Tesla‘s government subsidies and contracts through the DOGE department to save “big” as their relationship deteriorated.
Such threats have also pressured the share price at Tesla.
It has suffered throughout Trump 2.0 and, in fact, has trended lower since last December – shortly after Mr Trump’s election win was confirmed.
Read more:
The Trump-Musk bust-up that everyone knew was coming
Musk hits out at Tesla succession claim
The possibility of tariff hits to the business, followed by actual tariff disruption, along with a consumer and investor backlash against Musk’s previous DOGE role have contributed to a 35% decline on the December peak.
The very absence of Tesla’s CEO dragged on the shares.
Tesla sales suffered globally as the trade war ramped up due to the imposition of tariffs by a government he supported, until the public row between him and the president began in early June.
Musk had only just renewed his 100% focus on Tesla and his other business interests by that time.
Tesla sales were down during the presidential election campaign last year and continued to decline, on a quarterly basis, during the first half of 2025.
Neil Wilson, UK investor strategist at Saxo Markets, said of the company’s share price woes: “Investors are worried about two things – one is more Trump ire affecting subsidies and the other more importantly is a distracted Musk.
“Investors had cheered Musk stepping back from frontline politics but are now worried he’s going to sucked back in and take his eye off Tesla.”
Business
Post Office scandal: Victims say government’s control of redress schemes should be taken away
Post Office scandal victims are calling for redress schemes to be taken away from the government completely, ahead of the public inquiry publishing its first findings.
Phase 1, which is due back on Tuesday, will report on the human impact of what happened as well as compensation schemes.
“Take (them) off the government completely,” says Jo Hamilton OBE, a high-profile campaigner and former sub-postmistress, who was convicted of stealing from her branch in 2008.
“It’s like the fox in charge of the hen house,” she adds, “because they were the only shareholders of Post Office“.
“So they’re in it up to their necks… So why should they be in charge of giving us financial redress?”
Nearly a third of Ms Hamilton’s life has been dominated by the scandal
Jo and others are hoping Sir Wyn Williams, chairman of the public statutory inquiry, will make recommendations for an independent body to take control of redress schemes.
The inquiry has been examining the Post Office scandal which saw more than 700 people wrongfully convicted between 1999 and 2015.
Sub-postmasters were forced to pay back false accounting shortfalls because of the faulty IT system, Horizon.
At the moment, the Department for Business and Trade administers most of the redress schemes including the Horizon Conviction Redress Scheme and the Group Litigation Order (GLO) Scheme.
The Post Office is still responsible for the Horizon Shortfall scheme.
Lee Castleton OBE
Lee Castleton OBE, another victim of the scandal, was bankrupted in 2007 when he lost his case in the civil courts representing himself against the Post Office.
The civil judgment against him, however, still stands.
“It’s the oddest thing in the world to be an OBE, fighting for justice, while still having the original case standing against me,” he tells Sky News.
While he has received an interim payment he has not applied to a redress scheme.
“The GLO scheme – that’s there on the table for me to do,” he says, “but I know that they would use my original case, still standing against me, in any form of redress.
“So they would still tell me repeatedly that the court found me to be liable and therefore they only acted on the court’s outcome.”
He agrees with other victims who want the inquiry this week to recommend “taking the bad piece out” of redress schemes.
“The bad piece is the company – Post Office Limited,” he continues, “and the government – they need to be outside.
“When somebody goes to court, even if it’s a case against the Department for Business and Trade (DBT), when they go to court DBT do not decide what the outcome is.
“A judge decides, a third party decides, a right-minded individual a fair individual, that’s what needs to happen.”
Pic: AP
Mr Castleton is also taking legal action against the Post Office and Fujitsu – the first individual victim to sue the organisations for compensation and “vindication” in court.
“I want to hear why it happened, to hear what I believe to be the truth, to hear what they believe to be the truth and let the judge decide.”
Neil Hudgell, a lawyer for victims, said he expects the first inquiry report this week may be “really rather damning” of the redress claim process describing “inconsistencies”, “bureaucracy” and “delays”.
“The over-lawyeringness of it,” he adds, “the minute analysis, micro-analysis of detail, the inability to give people fully the benefit of doubt.
“All those things I think are going to be part and parcel of what Sir Wynn says about compensation.
“And we would hope, not going to say expect because history’s not great, we would hope it’s a springboard to an acceleration, a meaningful acceleration of that process.”
Please use Chrome browser for a more accessible video player
June: Post Office knew about faulty IT system
A Department for Business and Trade spokesperson said they were “grateful” for the inquiry’s work describing “the immeasurable suffering” victims endured.
Their statement continued: “This government has quadrupled the total amount paid to affected postmasters to provide them with full and fair redress, with more than £1bn having now been paid to thousands of claimants.
“We will also continue to work with the Post Office, who have already written to over 24,000 postmasters, to ensure that everyone who may be eligible for redress is given the opportunity to apply for it.”
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike