Bank of England governor urges workers to limit pay rise demands to help others without 'bargaining power'

The Governor of the Bank of England has urged workers to limit their demands for pay rises this year, warning of the impact of high inflation on those without "bargaining power".

Andrew Bailey said the problem was one "we should all be very aware of" hours after warning that households will suffer the biggest drop in living standards on record as the UK plunges into a year-long recession this autumn. p>

He also dismissed criticism from allies of Liz Truss, the favorite to become prime minister, that the bank should have raised interest rates sooner, warning that it could have been a downfall. ter the economy.

Calling for wage moderation, Mr Bailey said: "If everyone is trying to fight inflation, it n, it gets worse, that's the problem."

< p>He added: "There is a second problem. I put it in terms of big wage increases and big price increases, because in this world it is the less well-off people who are the most affected, because they don't have the bargaining power. I think that's something we all need to be very aware of."

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The current inflation hikes have been particularly problematic because they concentrate on rising prices for "essentials" such as energy and food. He warned that the bank must act to ensure that inflation does not become "embedded".

"My key point is: if inflation takes root and persists, it gets worse and the effects are getting worse and that's why we have to raise fares,” he told BBC Radio 4's Today programme.

Union leaders reacted angrily Kate Bell, TUC head of economics, said: 'It's time for companies to limit their profits, not for rushed workers to slash even further.

'Without increases in wages, workers will simply stop spending on anything non-essential - and that will hurt our high streets, damage business and make a recession very likely, putting jobs across the country at risk.

"Making sure people can put food on the table for their families isn't going to drive up inflation.

On Mr. Bailey's mention of those without bargaining power, she added: "'If the Governor is concerned that some workers will benefit from negotiated wage increases, he should encourage all workers to join a union. "< /p>

A former Truss supporter and business secretary, Kwasi Kwarteng, told Sky News that the BoE's mandate will be reviewed if it wins the election.

"If your target is 2% and you expect 13% something has gone wrong,” he said.

Another ally, Suella Braverman, also accused the bank of not raising interest rates fast enough. But Mr Bailey countered that the bank had been raising rates since December and doing so so soon could have jeopardized the economy.

"We don't make policy in hindsight," Bailey said. "I would challenge anyone to have sat here a year ago and said, 'There's going to be a war in Ukraine and it's going to have this effect on inflation.'"

“If you go back two years, given the situation we were facing at that time in the context of Covid, in the context of the labor market, the idea that at that time we would have tightened monetary policy… I don't remember there were many people saying that at this time."

He also pointed to warnings of a sharp rise in unemployment as the program of Covid holiday was coming to an end.

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