Andrew Bailey warns he risks causing recession if rates rise further

' Credit: Jason Alden/Bloomberg

Andrew Bailey has been warned that he risks plunging the UK into recession later this year if Bank of England interest rates push for a further increase in borrowing costs.

Andy Haldane, formerly borrower chief economist at the Bank, urged his former colleagues on the Monetary Policy Committee (MPC) to halt the current rate hike cycle.

The Bank raised interest rates last week from 4.25% to 4.5% in 12th time in a row.

1205 Bank rate

“In this situation, I would probably hit the pause button,” Mr. Haldane told the New Statesman. .

“I think there's a lot of tightening already in the works, most of which we haven't seen in full yet as they affect mortgage payments at the end of the year. The recovery is still quite fragile,” he added.

Analysts overwhelmingly forecast growth of another 0.25 percentage point in June.

Most also expect a similar increase after August. , pushing interest rates up to 5%.

Mr Haldane, who is now chief executive of the Royal Society of Arts, said that further rate hikes would carry big risks for the economy.

“It will be a slightly tighter compression. This slightly increases the risk that we will indeed enter a recession this year, unemployment will affect the labor market,” he said. The council, but also advised Labor, urged politicians to be bolder and take out loans to boost the economy.

Mr. Haldane accused both political parties of lacking ambition at a time when it is badly needed.

“We need to be much more ambitious about how we think about fiscal policy in general. When it comes to fiscal rules and fiscal fairness, there aren't many papers between Labor and government right now that can be put between Labor and government,” he said. when, by any historical measure, it's still incredibly cheap for governments to borrow.”

Debt skyrocketing — public sector net debt as a % of GDPa. ”, however.

“Given the malaise of growth we are facing, the climate crisis we are facing, the social insecurity that many in society are facing, what better place than now to make these investments? I would,” Mr. Haldane said.

The UK has so far narrowly avoided a recession, while the economy is expected to slowly return to growth in the second half of the year.

Unemployment has risen only slightly over the past year and remains close to a historic low for at 3.9%.

Mr Bailey has previously warned that there are significant risks that not enough can be done now to contain inflation and allow it to take root in the economy.

The central bank governor on Wednesday said there were already signs of wage increases. price spiral, making it more difficult than expected to bring inflation down to its target.

Mr Haldane, who also served on the Bank's rate-setting commission for seven years, said there was room for slowdown , so- However, this is called “monetary tightening.”

“Personally, I think we can afford to spend a little more time to bring inflation back to the target level. This will be a price worth paying to keep the economy and jobs going,” he said.

He also warned that while achieving Rishi Sunak’s goal of halving inflation within a year should be fairly easy as energy prices in the autumn, what comes next may be more difficult.

“The real challenge is to bring inflation down to the [BoE] target of 2%. It will be much more difficult. If it was me, I wouldn't be rushing those last hard yards,» Haldane said.