Bank of England governor Andrew Bailey said on Monday that he was “very uneasy” about the outlook for inflation.
Speaking at the Treasury Select Committee hearing, Bailey said his vote to keep interest rates on hold at a record low of 0.1% this month had been a “very close call”. He also insisted that the Bank had never said it would lift rates at the meeting, after the move surprised markets.
The Bank voted 7-2 to keep rates unchanged, with Catherine Mann and Michael Saunders opting for a rate hike.
“As a point of guidance, in terms of emphasising the primacy of the inflation target and the link to medium-term inflation expectations, I thought it was critical that we put our foot down at that point,” Bailey said. “I am concerned that there is a view in some quarters that we’ve gone off that and just sort of never admitted it. It’s not true.”
Still, Bailey said he was “very uneasy about the inflation situation”.
“It is not of course where we wanted to be, to have inflation above target,” he said.
Figures released last month by the Office for National Statistics showed consumer price inflation dipped to 3.1% in September from 3.2% the month before, coming in well above the Bank’s 2% target. It is expected to reach 5% by April next year, which would be the highest level for a decade.
MPC member Michael Saunders said he voted for a rate rise because of the tight labour market and signs there had been a pick-up in wage growth, but he dismissed comparisons with the 1970s.
“There is no risk of a wage price spiral in the UK,” he said. “Talk of a return to the 1970s is completely misplaced. The economy has changed in many ways since then.”