Bank boss ‘asleep at wheel’ as Hunt says: I’d risk a recession

THE Bank of England governor was accused of being ‘asleep at the wheel’ yesterday amid fears that further interest rate hikes could tip the UK into recession.

Critics argue that Andrew Bailey took too long to wake up to the inflation threat and could have spared the need for further painful rate increases if he had acted sooner.

However, Chancellor Jeremy Hunt said he is ‘comfortable’ with the Bank doing what is needed to calm inflation even if it leads to a downturn.

Tory former business secretary Jacob Rees-Mogg, who is more critical, told the Mail: ‘The Bank of England has been asleep at the wheel.

‘It should be held to account for its failures, which are now leading to higher interest rates for longer than would have been necessary.’

Millions of households are already counting the cost of a series of rate hikes which have added hundreds of pounds to their annual mortgage repayments.

And it could get even worse. Figures this week showed inflation falling below 10 per cent for the first time since last summer but, at 8.7 per cent, still proving stubbornly hard to bring under control.

As a result, interest rates are expected to rise further, with markets expecting they will hit 5.5 per cent later this year.

There is a chance they could even reach 5.75 per cent.

The aim of rate hikes is to cool demand in the economy in order to dampen spiralling prices. But the risk is that by dampening activity too much they could cause recession and job losses. Supporters of the strategy argue that this is a price worth paying to defeat the scourge of inflation – which is a huge drag on living standards as wage growth fails to keep pace with prices.

In an interview with Sky News, Mr Hunt was asked whether he was ‘comfortable’ with the Bank doing what was needed ‘ even if that would potentially precipitate a recession’.

He said: ‘Yes, because in the end, inflation is a source of instability. And if we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take.’

His view appears to have public backing, with a YouGov survey yesterday finding that 51 per cent want the Government to focus on bringing down inflation versus 33 per cent saying preventing recession should be a priority. However, Labour MP Angela Eagle said Mr Hunt’s remarks were reminiscent of a comment by John Major, as Tory Chancellor in 1989, that ‘if it isn’t hurting, it isn’t working’.

Ms Eagle blamed the Government for halting growth by ‘creating political instability and uncertainty’.

Mr Rees-Mogg blamed the governor. He said: ‘The Bank of England failures are long standing but Bailey is in the driving seat today.’

Earlier this week, Mr Bailey admitted under questioning by a select committee that the Bank had ‘very big lessons to learn’ about how to respond to inflation shocks.