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In the face of rising inflation in Britain, Bank of England Governor has stated that he was “very sorry”. There are even forecasts for inflation to reach 5%.

Andrew Bailey explained to BBC that the rising costs were already having an impact on households.

He said, “I am very sorry that this is happening.” He said, “We don’t want that to happen.”

The Bank surprised the financial markets on Thursday by voting to maintain the current interest rate.

The rate, currently at 0.1% (a historical low), was signaled that it would rise over the “coming months”, as inflation is anticipated to increase.

The Bank’s Monetary Policy Committee (MPC), voted in large numbers to keep borrowing costs at the November meeting. This was partly to assess how the job market has reacted to the ending of the furlough program.

At 3.1%, inflation is ahead of the Bank of England’s target of 2%. It is possible that it will rise to 5% next April.

  • What does interest rate affect my money?
  • What is driving the rising cost of living?

Bailey stated that inflation has a direct impact on household income. It’s obvious that they already feel it with rising prices.

He said that the Bank would like to assess the impact of both global and domestic issues on the cost to live before raising rates.

According to Mr Bailey, current conditions are different as inflation is being driven by global supply shocks rather than UK demand.

At its December meeting, the Bank didn’t rule out an increase in rates. Every six weeks, the MPC meets.

However, he commented on the fact that borrowing costs were not going up this month. Bailey explained that raising interest rates, “I’m afraid,” isn’t going get us more gasoline.

Market analysts and former MPC members criticized Mr Bailey on Thursday for suggesting that the interest rates would soon increase, but it was held. Reacting to the announcement, the pound dropped as much as 1.5% against USD

Although he stated in October that “the Bank will have to act” to slow the pace of inflation, he didn’t provide a timeline for when this might happen.

BBC spoke to Mr Bailey who said the Bank had concerns about the Bank seeing signs that summer inflation was increasing. He said that while he believed it likely that interest rates would rise, he felt it necessary to warn people.

He said, however that he and no other member of MPC had ever stated that the interest rates would rise in November.

Danny Blanchflower was a member of the MPC, but is now an economist professor at Dartmouth College.

He said that there was no precedent in history for the events. We’ve never experienced a shock this severe, and what we see right now is that the furlough plan is being scrapped. This will lead to an increase in National Insurance taxes. [and]The universal credit limit was recently reduced.

“So the central banks really doesn’t have much clue about what is happening.”

He stated that “this is a very big uncertain world, and everyone should tread carefully.” You have to be careful what I say, I am afraid.

Source: BBC.com

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