Andrew Bailey says he was right to tell people not to ask for a big pay rise

Andrew Bailey admitted he had to learn “very important lessons”; after the Bank failed to anticipate the rapid rise in inflation. Photo: AP Photo/Alastair Grant

Andrew Bailey said he was “right” to tell people not to ask for big pay rises, despite rising inflation and the biggest fall in living standards in decades.

The Governor of the Bank of England once again reinforced controversial comments made last year when he urged Britons to show restraint on wages to help keep prices under control.

< p>This drew widespread criticism from trade unions and economists at the time, who argued that Mr Bailey was out of touch with reality.

However, when asked in a recent interview with Prospect magazine whether the attacks were justified, he defended his view that higher wages would fuel inflation: «I think sometimes it's easy to sit back and say, 'Well, I was right.' isn't it?

Mr Bailey previously acknowledged that the Bank had «learned very important lessons» from its failure to anticipate the rapid rise in inflation following accusations that the bank had raised interest rates too slowly from a record low of 0.1%.

Inflation currently stands at 6.7%, well above the Bank's 2% target and outpacing price increases in other G7 countries.

Policymakers don't expect inflation to return to target until mid-2025.

Sir Charlie Bean, the previous deputy governor for monetary policy and Bailey's former boss, said telling workers to hold off on pay rises » a little stupid.»

He said, «It's not going to work and it looks like they're blaming the workers for what's going on, which I don't think is the most constructive way to communicate the problem.»

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Sir Charlie also said it had drawn criticism from trade unions, who might say: «It's very good for Andrew Bailey and the people at the Bank who are paid very well for it.»

And also defended his position . On wages, Mr Bailey said «pretty gloomy» predictions of the City's post-Brexit decline were wrong, but added the short-term impact on the economy had been negative.

He said Brexit had had negative consequences . “created opportunities,” adding, “I think we protected and in some ways ensured that most of the market and most of the industry would stay here. And that was important.”

He added that the UK would need to continue to “build new trading relationships” to succeed. He said: “We will have to work even harder to avoid becoming isolationists.”

Mark Carney, the Bank's previous governor, said the entire economic impact of Brexit had been negative, despite the strength of the British labor market.

He also partly blamed Brexit for the sharp rise in inflation.