In the United Kingdom, criticism is beginning to rain down on the Bank of England, particularly from the government, but also from economists and former leaders of the monetary institute. She is particularly singled out for having “fallen asleep at the wheel” and for having let the strongest inflation of the G7 take hold. The latter indeed exceeds 10%, far exceeding the Bank’s 2% objective.
Reaching a record level for forty years, inflation is expected to rise further in the coming months, up to 13% according to the BoE, causing a purchasing power crisis that threatens to plunge many households into poverty. “Clearly, something has gone wrong,” castigated Minister of Business and Industry Kwasi Kwarteng in an interview with Sky News, saying that “rates should have risen sooner”.
His independence questioned?
These criticisms come as Liz Truss, the poll favorite to succeed Boris Johnson as Prime Minister, has proposed to review the status of the Bank of England, whose independence dates from 1997. The governor of the Bank of England England Andrew Bailey meanwhile adopted a cautious response, repeatedly saying he did not want to interfere in Conservative Party debates.
He nevertheless asserted that the financial credibility of the United Kingdom depended on the independence of its Central Bank. Andrew Bailey also recalled that the BoE had raised its rates from the end of 2021, earlier than the American Federal Reserve or the European Central Bank. In the United States, inflation slowed slightly in July, to 8.5% over one year, and reached a new record in the euro zone at 8.9%.
The war in Ukraine and Brexit responsible?
Like the European Union, the United Kingdom is suffering from the energy crisis caused by the Russian invasion of Ukraine, but also from a disruption of supply chains and a shortage of workers exacerbated by Brexit. According to Mr. Bailey, a faster rise would have occurred in the midst of a resumption of Covid-19 contaminations, even if the Omicron variant did not lead to new hard confinements.
“It’s true, inflation is high this year, but the message is the same: in eight centuries, independence is the best way to have measured and stable inflation,” a committee member said on Twitter. monetary, Jonathan Haskel, who accompanies his message with a table where the average inflation between 1997 and 2022 reaches barely more than 2%.