BoE/Pill: People need to accept that they are poorer

Huw Pill, Chief Economist of the Bank of England (BoE), participated in a podcast broadcast by Columbia University Law School, saying that British people are poorer in the face of high inflation, accepting this and saying that they should not demand a wage increase.

Pill noted that everyone in the UK is trying to transfer the inflation package to the next link in the chain, and this is understandable to a certain extent.

Underlining that the UK is a major natural gas importer, Pill said, “If the cost of what you buy has increased compared to what you sell, it means that your situation will get worse.”

“We are faced with a reluctance to accept that we are all worse off and must do our part,” Pill said.

Phil warned that projecting inflation to another consumer and company has the feature of increasing inflation even more, and that if it continues, inflation may be permanent.

Reminding that inflation has been above the 2 percent target level of the Bank of England for a long time, Pill said, “Inflation has continued to hover above forecasts for a very long time in an undesirable way.”

Stating that Russia has cut off the gas flow to Europe and as a result, the wholesale purchase prices of natural gas have increased significantly, Pill said, “This has contributed greatly to inflation.”

Last month, the Bank of England (BoE) decided to raise the policy rate by 25 basis points from 4 percent to 4.25 percent in order to reduce inflation to the 2 percent target level in the country.

Although inflation in the country declined to 10.1 percent in March this year, it is still in double digits. Inflation rose 11.1 percent year-on-year in October 2022, reaching the highest level in the last 40 years.

In the markets, the Bank of England is expected to make a new interest rate increase in order to reduce inflation next month.