The governor of the Bank of England will say it is “crucial that we see the job through” to slow soaring prices in a speech to the world of finance later.
Andrew Bailey will say reducing inflation to 2% is “so important” as people “should trust that their hard-earned money maintains its value”.
Currently, inflation, which is the rate prices rise at, is 8.7% – more than four times the Bank’s target of 2%.
Chancellor Jeremy Hunt will also speak at the Mansion House event in London.
He will take to the stage to unveil plans for pension fund reform aimed at boosting economic growth and will outline “three golden rules” with measures to unlock capital for high-growth businesses.
‘Meet our mandate’
Businesses, as well as households, are being hit by higher costs due to inflation remaining stubbornly high in the UK.
The Bank has steadily been increasing interest rates in a bid to combat it.
Its base rate – which has a direct effect on borrowing costs for things like mortgages and credit cards, but also influences savings rates – is now 5%, up from close to zero 18 months ago. Some analysts have predicted interest rates will peak at 6.5%, but some have said they may rise to as high as 7%.
Making it more expensive for people to borrow money, and more worthwhile for them to save in theory is to cause people to spend less and lead to prices to not rise as fast.
On Monday evening at Mansion House, Mr Bailey will say: “It is crucial that we see the job through, meet our mandate to return inflation to its 2% target, and provide the environment of price stability in which the UK economy can thrive.”
He will add that while the UK economy has failed to grow beyond its pre-pandemic level, there had been “unexpected resilience” in the face of external shocks, such as Covid and the war in Ukraine, with low levels of unemployment and avoiding a recession to date.
But the Bank of England’s boss will highlight that “tightness” in the labour market, with many businesses struggling to fill positions, has contributed to price inflation being “more sticky than previously expected”.
“Both price and wage increases at current rates are not consistent with the inflation target,” he will add.
The Bank of England has previously warned big pay rises are contributing to the UK’s still-high rates of inflation.
But there have also been accusations that some industries have been profiteering by overcharging customers to increase profits.
For example, last week the Competition and Markets Authority revealed supermarkets, known usually to have cheaper fuel prices, had sought to increase profits from selling fuel, increasing their margins by 6p per litre on average between 2019 and 2022.
‘Evolutionary not revolutionary’
Before Mr Bailey speaks, Mr Hunt will outline the “Mansion House Reforms” are designed to make the UK the most innovative and competitive financial centre in the world, the Treasury said.
The chancellor is expected to promise “evolutionary not revolutionary” reforms to encourage pension funds to invest up to £50bn into high-growth businesses, especially in the areas of fintech and life sciences.
Mr Hunt’s first rule will be that “first and foremost” funds must ensure the best possible outcomes for savers.
“Secondly, we will always prioritise a strong and diversified gilt market,” the chancellor is expected to say. “Those who invest in our gilts are helping to fund vital public services and any changes must recognise the vital role they play.”Finally, Mr Hunt will insist any changes to pension funds must strengthen, rather than compromise, the UK’s global competitiveness.
But the chancellor will say there can be “no sustainable growth without first eliminating the inflation that deters investment and erodes consumer confidence”.
He will also promise the government will continue to honour its “responsibilities to those struggling the most” in the face of inflation.
Around 400 people are set to attend the event at the 18th Century building.
After former chancellor George Osborne’s wedding was targeted by a protester at the weekend, Mansion House organisers said talks had taken place about security at the venue.
Environmental group Just Stop Oil denied throwing orange confetti over the newly married couple outside a church in Somerset.
A spokeswoman for the City of London Corporation, which is in charge of the venue, said “we always have adequate protections in place”.
But the venue has been targeted before by protesters – in 2019 Greenpeace activists infiltrated the black-tie event and interrupted then-chancellor Phillip Hammond as he began his speech.
Just Stop Oil said it never made any comment about its activities ahead of any demonstration.
The Treasury told the BBC it would not comment about security issues.
Source: BBC
