Andrew Bailey, Governor of the Bank of England says that workers should not ask their bosses for pay rises this year so the cost of goods does not spiral out of control amid rising inflation. His warning comes after the bank raised interest rates yesterday for the second time in a row from 0.25% to 0.5% amid rising energy costs and soaring inflation rates. Inflation is predicted to peak at 7.25% in April, and average close to 6% across 2022, as measured by the Consumer Prices Index.

If inflation does hit 7.25% in April, it would be the fastest price growth since 1991 and well above the BoE’s 2% target.

He said

‘We do need to see a moderation of wage rises. I don’t want to sugar that in any sense, it is painful, but we need to see that in order to get through this problem more quickly,’

Bailey said he does not expect the cost of living crisis, including a predicted £693 rise in energy bills and an inflation prediction of 7.25%, to ease until next year, adding that UK households are in for a ‘difficult period’.

‘We’re going to start coming out of it in 2023, and two years from now, we expect inflation to be back to a more stable position.’

What they are concerned about is “Wage Price Inflation Spiral”

Where :

1. Inflation erodes the value of your savings and salary, relative to the price of goods
2. People ask for pay rises to keep up, and go on strike if they don’t get them
3. The costs of the pay rises or strikes are then added onto to goods to maintain the profits
4. And you get a wage price spiral.

The question is Who should pay for this? The QE which is a new name for the National debt, has frankly, been recklessely, and very innefficiently spent over the last 40 years. The beneficiaries have not been the wealth generators rather the people who wasted the money. Our money.

This is a very real problem, and it is coming home to roost right now.

This Graph is Pre Covid. It is currently pretty much vertical. Does this look like a sustainable scenario to you?