The Governor of the Bank of England has given an “apocalyptic” warning, saying further rises in food prices are a “major worry” and “major concern”. Andrew Bailey said further food inflation cannot be ruled out and is a “major worry” for the central bank. “Ukraine and Russia is the big risk in a way,” he said. “One is the risk of a further energy price shock, which would come from the cutting off of gas and distillates, such as products like diesel and then, the one which I might sound rather apocalyptic about, is food.”
He said he was in Washington a month ago and spoke to the Ukrainian finance minister. “Two things the finance minister said is that Ukraine does have food in store but they can’t get it out at the moment and two, while he was optimistic about crop planting, as a major supplier of wheat and cooking oils, he said we have no way of shipping it out and that is getting worse. It is a major worry for this country and a major worry for the developing world as well. Sorry for being apocalyptic”.
He told MPs that he does not believe the central bank could have acted differently amid criticism it did not move quickly enough to attempt to curb soaring inflation. Mr Bailey told the Treasury Committee: “As you say, there have been a series of supply shocks and most recently with the impact of the war, Russia’s invasion of Ukraine. We can’t predict things like wars – that’s not in anybody’s power. I don’t think we could have done anything differently; we could not have seen a war with Ukraine. There is also a further leg of Covid, with the situation in China, which appears to be affecting the country more seriously.”
Mr Bailey also told the committee that he was taken by surprise by the reduction in the UK labour market in the aftermath of the pandemic. “We have seen a fall in the size of the labour market; since 2019, we’ve seen a fall of around 450,000, or 1.3%,” he said.
He added there had been an impact of both Covid and Brexit on the labour market. “In the margin of the labour force it’s a very big fall and represents a 3% increase in the number of economically inactive people, meaning someone who isn’t searching for a job, unlike an unemployed person who is looking for one. The scale and persistence of this drop has been a surprise to us.
“We have seen an increase in long-term sickness in that number of about 320,000 people, and so what we’ve done in the main monetary policy report is to lower the projected view of labour participation. We now expect that to be flat at 63% of the working-age population. We originally thought we might have a recovery to 63.5%.” To keep up to date with the biggest issues affecting Wales subscribe to our Wales Matters newsletter here.