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Bank of England chief warns of further rate hikes amid cost of living crisis

Bank of England chief warns cost of living crisis is WORSE than 2008 credit crunch as he hints interest rates will rise another 1% next month, saying the bulls must “keep running”

  • Bank of England chief economist warns interest rates must ‘keep running’
  • Huw Pill has suggested that the crisis is the biggest challenge since the Bank’s independence
  • The interest rate was raised to 1% earlier this month to control inflation

The Bank of England’s chief economist has warned that the cost of living crisis is a bigger challenge than the credit crunch and interest rate hikes have “no longer to run”.

Huw Pill said inflation of 9% – the highest in 40 years – is “very uncomfortable” and the Bank must respond despite the slowing economy.

He suggested the situation is the biggest problem the Monetary Policy Committee has faced since Threadneedle Street became independent from the Treasury a quarter of a century ago.

The comments will fuel alarm that mortgage payers face more misery, with UK plc set to back down as inflation peaks in double digits at the end of the year.

Chancellor Rishi Sunak is facing massive pressure to step in to ease the worst pressure on incomes in a generation.

In a speech to the Association of Chartered Chartered Accountants of Wales, Mr Pill – a key member of the MPC – said: ‘On Wednesday we heard that consumer price inflation in the UK s currently stands at 9%.

Bank of England chief economist Huw Pill said inflation of 9% – the highest in 40 years – is ‘very uncomfortable’ and the Bank must react to the slowdown in GDP

Mr Pill warned that the cost of living crisis is a bigger challenge than the credit crunch and interest rate hikes have

Mr Pill warned that the cost of living crisis is a bigger challenge than the credit crisis and interest rate hikes have “no more to run”. The base rate was raised to 1% earlier this month

It emerged this week that CPI inflation hit 9% in April and is expected to continue rising this year.

It emerged this week that CPI inflation hit 9% in April and is expected to continue rising this year.

Ex-governor says Bank drove up inflation by printing money during pandemic

The UK’s former chief central banker has accused the Bank of England and other top officials around the world of helping to drive up inflation by printing more money during the pandemic.

Mervyn King, who was governor of the Bank during the 2008 financial crisis, said there were misconceptions in central banks.

“Interestingly, it was common to all central banks. They basically felt: ‘We have to demonstrate that we are here, we have to do something,’ he told Sky News.

“But governments were doing a lot, although in our case the furlough scheme, which made a lot of sense … it didn’t need central banks to print a lot of extra money on top of all that. This generated a rise in inflation.

“The MPC expects it to grow in double digits in the fourth quarter of this year.

“For a monetary policy maker tasked with hitting a 2% inflation target, this is obviously a very uncomfortable situation.”

Earlier this month, the MPC voted to raise the base rate from 0.75% to 1%, with analysts saying further hikes are expected. Three committee members voted to raise the rates further, to 1.25%.

Mr Pill said monetary policy had been in “supportive mode” since the financial crisis, but inflation and a tighter labor market were contributing to the need for the transition.

“The further increase in the bank rate to 1% should be seen as part of this transition process,” he said.

“But this is not the end of the transition. In my opinion, we still have some way to go in tightening our monetary policy in order to secure the return of inflation to the target.

He said the Bank will have to take action to bring inflation down to 2%.

“It is this commitment that has led me to support monetary policy tightening since I joined the committee last September, and to signal today that this tightening still needs to continue,” he said. he declares.

Mr Pill said there is a danger of wages and prices feeding off each other to keep inflation high.

But at the same time, the squeeze on household incomes could affect demand and employment, which could push inflation below the Bank of England’s 2% target.

The Bank celebrated a quarter century as an independent institution earlier this month.

“This celebration came at a difficult time for UK monetary policy, for the reasons I set out in my remarks today,” Mr Pill said.

“With double-digit inflation forecast following the very sharp rise in international energy and goods prices, this is the biggest challenge the MPC has faced in the last quarter century.”

Latest Bank of England projections for GDP and inflation made for miserable reading

Latest Bank of England projections for GDP and inflation made for miserable reading

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