Andrew Bailey’s subtle wage spiral warning

Treasury select committee meetings are not usually the stuff of great television. But this morning, it was. The Bank of England’s governor Andrew Bailey was up as a witness to give evidence on recent Monetary Policy reports. And the committee’s new chair, Harriett Baldwin, came ready to highlight where (many) mistakes had been made.

Starting with where we are today – inflation still over 10 per cent, five times the Bank’s target – Bailey was forced to sit and listen to his own record over the past eighteen months. Beginning in May 2021 and moving into that autumn, Baldwin quoted his own warnings about ‘very hot areas of prices’ back to him. She noted that as inflation did indeed start rising – by November 2021 the headline rate of inflation was double the Bank’s target – the Bank was keeping interest rates at record lows. A year ago today, she noted, still before Russia had invaded Ukraine, inflation was at 6 per cent yet rates were at 0.5