The top economist at the Bank of England says people must accept the fact that their financial situations are eroding.
In a new interview on Columbia Law School’s Beyond Unprecedented podcast, Huw Pill says people of all stripes should stop seeking higher pay to maintain the lifestyles they are used to.
“If the cost of what you’re buying has gone up compared to what you’re selling, you’re going to be worse off.
So somehow in the UK, someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices, whether [through] higher wages or passing the energy costs through on to customers.
And what we’re facing now is that reluctance to accept that, yes, we’re all worse off. And we all have to take our share. Instead, [people] try and pass that cost on to one of our compatriots, saying ‘we’ll be all right, but they will have to take our share too’.
That ‘pass the parcel’ game that’s going on here, that game is generating inflation, and that part of inflation can persist.”
In August of last year, Bank of England governor Andrew Bailey expressed similar sentiments.
Bailey told BBC’s Radio 4 podcast that people should not ask their employers for significant wage increases.
The central bank’s controversial outlook is based on the notion that giving people higher salaries due to rising inflation is bad for inflation.
“If everybody tries to beat inflation – in price-setting and wage-setting – it gets worse.”
In its yearly outlook, the International Monetary Fund (IMF) said the UK will likely be the worst-performing major economy in 2023, shrinking by 0.3%.
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