Bank of England Governor Andrew Bailey blamed the war in Ukraine for Britain’s highest inflation in three decades and warned that “apocalyptic” food prices caused by Russia’s invasion could have a catastrophic impact on the world’s poor.
Giving testimony to lawmakers, Bailey said that while he was unhappy with the current rise in prices, 80% of the excess inflation was due to factors beyond the Bank’s control.
“I don’t feel very happy and it’s a bad situation,” the governor told the Treasury’s election committee when asked to explain why inflation was 7% – more than three times the official 2% target.
“We’ve seen a series of supply shocks coming one after another, and it’s unprecedented.”
After reports over the weekend that unnamed cabinet ministers questioned whether the Bank should remain independent, Bailey said: “This is the biggest monetary policy test in 25 years. There are no questions about that. “
Official figures, which will be released later this week, are expected to show that annual inflation will rise above 9%, something not seen since the early 1980s.
Asked about future risks to the cost of living, Bailey said long-term bottlenecks in the supply chain could result from disruptions in China or rising energy prices if Russia decided to stop gas supplies.
The governor said his concerns about food supplies had intensified after talks with Ukraine’s finance minister at an IMF meeting in Washington last month.
“He said he was optimistic about planting crops, but at the moment there was no opportunity to send food, and the situation is getting worse,” Bailey said.
“This is not only a serious concern for this country, but also for developing countries. I’m sorry I’m apocalyptic, but it’s worrying. “