Bank of England Warns of Inflationary Pressures in UK

Bank of England Warns of Inflationary Pressures in UK

UK Declares Victory in Fight to Lower Inflation

The United Kingdom declared victory in its fight to reduce inflation despite being “first signs” of a decline. Bailey, the Bank of England Governor, gave a press conference to announce the entity had raised interest rates from 3.5% to 4%.

December 2021 saw the Consumer Price Index (CPI) fall from 11.1% in October 2022 to 10.5%. Bailey stated the CPI is expected to reach the Bank of England’s 2% target in 2024, if energy prices fall as expected.

The governor warned that energy prices may not fall and, even if they do, the high inflation could have an impact on wages. He urged not to declare victory yet, as “inflationary pressures continue”.

The rise in interest rates was also a response to the increase in unemployment caused by the covid-19 pandemic, hinting that job opportunities are now fewer due to the aging population. He concluded by stressing the drop in labor supply is hindering the economy’s potential.

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