The Governor of the Bank of England has warned a shortage of workers in the UK presents a ‘major risk’ to bringing down inflation this year.
Andrew Bailey told MPs on the Commons Treasury committee that the ‘shrinkage of labour force’ in Britain could prevent the rate of inflation from falling as much as hoped.
The comments present a challenge for Prime Minister Rishi Sunak, who earlier this month vowed to cut inflation in half in a series of pledges that included growing the economy, shrinking the national debt and shortening NHS waiting lists.
Back to normal: Bank of England governor Andrew Bailey (pictured) said markets have stabilised following the short and chaotic Liz Truss premiership
Inflation surged to a 41-year high of 11.1 per cent in October, exacerbated by higher energy prices as costs surged due to war in Ukraine.
While the figure eased to 10.7 per cent in November and is expected to have fallen further in December, it remains very high and well above the Bank of England’s inflation target of 2 per cent.
Bailey also said ‘things had restored to normal’ after September’s disastrous mini-Budget.
He told MPs that additional risk priced into British assets after then chancellor Kwasi Kwarteng’s financial statement has ‘pretty much gone’.
Bailey added that markets have stabilised following the chaotic Liz Truss premiership.
But he warned confidence remained fragile and it would ‘take some time’ to convince people stability had fully returned.
Investors dumped UK assets in the final months of 2022 after a slew of tax cuts outlined by Kwarteng sent markets into a tailspin.
But after most of the policies were dumped by Kwarteng’s successor Jeremy Hunt, Bailey said international investors now understood that ‘things have restored to normal’.
