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BoE governor warns firms not to hike prices

By Abigail Townsend

Date: Friday 24 Mar 2023

BoE governor warns firms not to hike prices

(Sharecast News) - The governor of the Bank of England has warned companies not to embed inflation by putting up prices.
Speaking to the BBC on Friday, a day after the Monetary Policy Committee upped the cost of the borrowing, Andrew Bailey said the BoE would raise interest rates again if inflation continued to mount.

He told the Today programme: "If all prices try to beat inflation, we will get higher inflation.

"I would say to people who are setting prices, please understand, if we get inflation embedded, interest rates will have to go up further and higher inflation really benefits nobody."

He conceded that he had not yet seen evidence of companies putting up prices by more than necessary, however, and said he did not expect firms - which have been battling surging costs for over a year - to take hits to their profits.

The BoE has upped interest rates 11 times since last December as it looks to tackle surging inflation, which last month unexpectedly rose to 10.4%. The cost of borrowing now stands at 4.25% following Thursday's quarter point rise. Bailey said immediately after the decision, however, that inflation was expected to fall "quite rapidly" before the summer.

Bailey also reiterated on Friday the BoE's view that the risk of recession had receded in recent weeks.

He said: "You can't rule out a risk, risks don't work like that. But what I would say very clearly is that the prospects for the economy in terms of growth are now better, considerable better.

"And I think it is reasonable to say that there's a pretty strong likelihood that we will avoid a recession this year."

A year ago, Bailey was criticised for calling on workers not to ask for big pay rises to better help control inflation.


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