THE Bank of England needs to “create a recession” to get rampant inflation under control, an adviser to Chancellor Jeremy Hunt suggested yesterday.
The UK has so far dodged a downturn as the economy has been stronger than gloomy estimates had predicted.
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However, unexpectedly strong inflation figures have led top economists to suggest the Bank will have to make life more difficult for millions so price rises can fall.
Karen Ward — part of a four-strong “wise persons” council to Mr Hunt — said the Bank had to “create uncertainty and frailty”.
She added: “It’s only when companies feel nervous about their future that they think, ‘well maybe I won’t put through that pay rise’. Or workers when they feel less confident about their job think, ‘I won’t push my boss for extra pay’.”
She told the BBC’s Today programme: “It’s that weakness in activity which eventually gets rid of inflation.”
The Government has set a target of cutting inflation to five per cent by the year’s end but it remains at 8.7 per cent.
The Bank is poised to raise interest rates again today.
It could keep doing so to heap pain on mortgage holders as a way of forcing households to tighten their spending.
Inflation has been hard to shift because of a tight labour market, with high levels of employment and vacancies. As a result, firms are having to pay more to recruit workers.
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The Ukraine war sparked the energy crisis and led to staff wanting higher pay to meet rising bills.
Firms then had to cover higher wages with price hikes.
CORE OF PROBLEM
THE UK faces months of gloom because a key inflation measure is remaining much higher than expected.
Core inflation reflects spending at restaurants, shops, gig tickets and dentists, rather than more volatile food and energy prices.
It is closely followed by the Bank of England and economists.
In May core inflation rose from 6.8 to 7.1 per cent despite forecasts saying it would stay the same.
Markets now believe the Bank will have to be more aggressive with rate rises.
Halfords tready to go places
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HALFORDS has launched a buy now, pay later scheme to help motorists fund repairs after it found almost three in four of them have tyres which are unsafe or with poor tread.
Customers at the auto parts and bikes chain can settle up next year interest-free if they pay a 15 per cent deposit.
Boss Graham Stapleton said it would help drivers who are delaying maintenance due to the cost of living.
Some 77 per cent of Halfords’ sales are now motoring-related, with auto sales up 61.2 per cent in the year to the end of March.
Cycle sales, which include Olympian Victoria Pendleton’s brand, fell 11.2 per cent as Covid-related demand tailed off.
Overall, annual profits fell 43 per cent due to inflation but Mr Stapleton said market share was rising as pressures eased, meaning higher profits this year.
Shares rose more than 5 per cent.
HOMES DIP FEAR
HOUSE prices rose by 3.5 per cent in the year to April but experts warn there will be steep falls ahead.
Official figures show growth in April slowed from 4.1 per cent in March. Sellers are already having to drop prices.
Halifax said earlier this month that prices dropped by one per cent year-on-year in May, the first fall since 2012.
Nationwide reported a 3.4 per cent annual fall in prices.
Experts at Pantheon Macroeconomics estimate prices will slip by eight per cent due to higher mortgage rates.
GOLDEN GOODBYE TO SHARES
THE tycoon behind e-commerce firm THG has given up his “golden share” in an effort to address shareholder concerns.
It gave Matt Moulding the power to block hostile takeovers.
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But he has been saying since last year that he would ditch the special share so the firm could qualify for a London main market listing.
During that time the company, which owns businesses including MyProtein, Espa, Coggles and tech arm Ingenuity has rejected three separate takeover approaches.
THG has also addressed concerns about the independence of director Iain McDonald, who tried to buy the business last year.
He is stepping down from the pay committee but is remaining on the board. Helen Jones is joining from Premier Foods.
THG said that it was no longer losing money, but wasn’t making any yet.
BOO TO BOOHOO
REVOLUTION Beauty says a bid by online fashion giant Boohoo to overthrow its board and install its own directors is a “cynical attempt to seize control”.
Boohoo, which has a 26 per cent stake in the cosmetics firm, called for a shareholder meeting to push for a shake-up.
It comes after a Revolution accounting scandal.
Revolution said its model to sell make-up in stores was at odds with Boohoo’s online-only approach.
It called the move “value-destructive, opportunistic and self-serving”.
