He could work on the delivery, but Bailey’s warnings were right
So was he right? Bank of England governor Andrew Bailey’s comments that Brits shouldn’t ask for a pay rise looked tin-eared at the time, and it didn’t help when the Bank then upped its bonus pool. But his warnings of a wage price spiral appear to be coming to fruition.
Now, what brought on the wave of criticism was the context: specifically, the fact that the man once nicknamed the “Sexy Turtle” lived up to his moniker by moving at prehistoric pace when inflation red flags began waving at the end of the second lengthy lockdown.
He was not helped by the Bank’s forecasters, whose Panglossian predictions for the economy have proven catastrophically off-beam.
What happens now? Well, rate rises.
No Bank of England governor worth his salt could look at record wage growth – in a low growth economy – and not think something’s up. One more hike seems nailed on.
But more than that would risk throttling what little economic growth UK PLC is currently able to generate.
Monetary policy is a balance, and a full autumn of rate hikes is too much for the economy to bear.
Growth is flat.
Prospects for growth are minimal. Bailey and the Bank’s errors have got us into a position where they must choose between stagflation and an economy running too hot. Regrettably, the latter is preferable.