Bank of England raises Bank Rate to 0.5%, Governor Andrew Bailey hints at wage cuts


The Bank of England (BOE) raised the country’s benchmark policy rate from 0.25% to 0.5% this week to curb runaway inflation. “We are facing a trade-off between high inflation and weaker growth,” UK central bank governor Andrew Bailey told reporters. Additionally, when asked by a BBC reporter if members of the BOE were urging British citizens not to ask for pay rises, Bailey replied: “Overall, yes.”

BOE raises rates for the second time since the start of the Covid-19 pandemic, the governor of the British Central Bank says “We must show restraint in wage negotiations”

The Bank of England raised the benchmark interest rate again after raising it in December. The BOE was the first major central bank to raise rates after the pandemic and on Thursday the rate fell again from 0.25% to 0.5%. The move by Britain’s central bank follows hawkish statements from the US Federal Reserve when it said it would hike rates “soon”. Fed Chairman Jerome Powell has signaled that rates will likely be raised in mid-March 2022.

Following the meeting of the BOE’s monetary policy committee, the bank revealed that four of the nine members of the committee wanted to raise the rate to 0.75%. However, the majority of committee members, including Governor Andrew Bailey, instead voted to raise the benchmark rate to 0.5%. After the rise, the pound hit a two-year high against the euro and UK government bonds sold off in Thursday afternoon trading sessions.

Meanwhile, England’s central bank expects inflation to peak in April at 7.25%, even with the recent increase in bank rates. Additionally, Bailey told the press that the public shouldn’t expect a marathon of benchmark rate hikes. “We are facing a trade-off between high inflation and weakening growth,” Bailey told reporters. While explaining that the rate hikes would not continue for an extended period, Bailey was asked about Britain’s working class by a BBC reporter.

“We’re looking to see some pretty clear restraint in the bargaining process because otherwise it will spiral out of control,” Bailey explained in a BBC Radio 4 interview. Don’t be I’m wrong but I think what I’m saying is we need to show restraint in wage negotiations The BBC reporter then asked the BOE Governor if Britain’s working class should stop to demand higher wages and Baily replied, “Overall, yes. Bailey’s remarks continued when he said:

“It’s painful. I don’t want to sugarcoat this message in any way. It’s painful. But we need to see this in order to get this resolved faster.

Former member of the BOE’s monetary policy committee: “Public sector workers have had their wages frozen for a decade”

Dartmouth College professor Danny Blanchflower, a former member of the BOE’s Monetary Policy Committee (MPC) from 2006 to 2009, said on Twitter that Governor Andrew Bailey had no idea. “Just as real wages turn sharply negative, Clueless Bailey tells workers it’s their fault [and] need to be paid less even if he won’t”, Blanchflower tweeted. “Public sector workers have had their pay frozen for a decade under Tory rule, what kind of world is this – it’s time for workers to tell it to get lost.” analyst Neil Wilson also criticized Bailey’s statements that he was not asking for raises. “Bank of England Governor Andrew Bailey says we can do our part to tackle rising inflation by not asking for pay rises,” Wilson wrote. “Coming from someone who’s been sleeping at the helm for 18 months, that’s not really helpful. How about doing your job? By that I mean getting inflation under control before it takes hold – which would have been to gently tighten it last summer. Too bad that moment was lost.

Keywords in this story

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What do you think of the increase in the benchmark interest rate by the BOE? What do you think of Andrew Bailey advising the British working class to stop demanding higher wages? Let us know what you think about this topic in the comments section below.

Jamie Redman

Jamie Redman is the news manager for News and a fintech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He is passionate about Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written over 5,000 articles for News about disruptive protocols emerging today.

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