Britain and the world are facing an “apocalyptic” risk of rising world food prices caused by the war in Ukraine, said the head of the Bank of England.
“Sorry for the apocalyptic moment, but it’s a big concern,” Andrew Bailey said Monday, noting that wheat prices alone have risen just under 25 percent in the past six weeks.
The central bank said its concerns were based on discussions with Ukrainian officials about the ability of major producers of grain and edible oil to export goods. They needed support to “figure out how to get her out of the country,” he said.
“And it’s a serious, serious concern, and it’s not just, I have to tell you, a serious concern for this country. There are serious concerns for developing countries as well. And so, if I had to sort of, I’m sorry I became apocalyptic for a moment, but it’s a big concern. “
The warning comes as the UK is already in a “bad situation”. inflationsaid Mr. Bailey.
The cost of living It was due to many global factors that could not predict bank rates, he added.
These include not only war in Ukraineand the latest response to the wave of Covid-19 contamination in China, which included economically harmful, harsh blockades. The result has been a sharp and sudden rise in world energy prices, which has raised the cost of living in the UK.
“I’m not happy about it, it’s a bad situation,” said Bailey, noting that inflation is expected to reach 10 percent later this year.
The head of the central bank answered questions from the chairman of the selection committee of the Treasury Mel Stride about whether he “slept behind the wheel” when it came to increasing pressure on interest rates.
About 80 per cent of the forces contributing to rising inflation in the UK have had global effects, Mr Bailey said. “80 percent of us can’t do much,” he added. “We have to acknowledge the reality of the situation we are facing.”
Another factor that accounted for the remaining 20 percent of price growth was the smaller workforce after the pandemic.
“The scale and duration of the fall were very unusual,” Mr Bailey said, adding, “I have to say that these are very good and rather difficult judgments.”
Mr Bailey’s remarks followed criticism of British cabinet ministers Daily Telegraph News report on Saturday.
Inflation, the rate of price growth in the economy, is 7 per cent, and the Bank of England predicts it could reach 10 per cent this year. This is relative to the central bank’s 2 percent target, which is a key part of its mandate, often referred to as price stability.
One senior minister said of the Bank of England: “It has one goal – to keep inflation at around 2 per cent – and it’s hard to remember the last time it reached its target.”
The second added that high-ranking officials “are now questioning his independence”, indicating greater political influence over the Bank, which became independent Gordon Brown, which was announced immediately after he became chancellor in 1997.
However, amid signs of weakening consumer confidence, the Bank of England may need to juggle the need to curb inflation with the need to avoid a recession. This is because higher interest rates can often act as a handbrake for economic growth.
The Bank of England has warned that a severe downturn in household living standards is likely to lead to a sharp economic slowdown earlier this month.
Ahead of the evidence session, Ed Smith, one of Rathbone Investment Management’s chief investment officers, said the recession forecast in the UK is worse than in other major economies. As a result, the Bank of England may be more likely than international counterparts, including the U.S. Federal Reserve, and “stop the harassment sooner than investors expect.”
“Changes in government spending and taxation are a bigger hurdle in the UK than in the US. Meanwhile, in the UK, the decline in the cost of living looks more intense, and British households have not accumulated savings to the same extent during the acute phase of the pandemic, ”he said.
“Consumer confidence in the UK has also fallen recently, and there have been some worrying signs of consumer data weakness, such as retail sales and new car registrations,” Mr Smith added.
Bank of England chief says UK faces “apocalyptic risk” of rising food prices
Source link Bank of England chief says UK faces “apocalyptic risk” of rising food prices