# Bank of England’s Bailey sweats over risk of ‘sticky’ summer for inflation Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-05-24 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Bank of England's Bailey warns of 'sticky' Meta Description: Bank of England's Bailey frets over 'sticky' summer for inflation as food prices continue to rise, despite headline rate dropping to single URL: https://financedigest.com/bank-of-englands-bailey-sweats-over-risk-of-sticky-summer-for-inflationhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-05-24t160143z2lynxmpej4n0imrtroptp4britain-boe-1736813977341-compressed.jpg) # Bank of England’s Bailey sweats over risk of ‘sticky’ summer for inflation By William Schomberg and David Milliken LONDON (Reuters) -Bank of England Governor Andrew Bailey said he was concerned about the risk of “sticky and stubborn” inflation over the summer after data showed food prices still rising sharply despite a drop back to single digits for the headline inflation rate in April. Bailey, who this week came under fierce criticism from lawmakers after inflation spent eight of the previous nine months above 10%, sought to underscore his commitment to getting price growth back to the BoE’s 2% target. Data published earlier on Wednesday showed the consumer [price index rose by 8.7% in annual terms last month](https://www.financedigest.com/world-food-price-index-falls-for-sixth-month-in-sept-fao.html "World food price index falls for sixth month in Sept -FAO"). That was down from 10.1% in March and a peak of 11.1% last October but was [higher than expected](https://www.financedigest.com/italian-hearing-aid-maker-amplifon-expects-higher-2023-earnings.html "Italian hearing aid maker Amplifon expects higher 2023 earnings") by economists polled by Reuters. It also left Britain with the joint-highest inflation rate among Group of Seven advanced economies along with Italy, despite 12 consecutive [interest rates](https://www.financedigest.com/ecb-needs-to-keep-interest-rates-sustainably-high-to-combat-inflation-lagarde.html "ECB needs to keep interest rates ‘sustainably high’ to combat inflation – Lagarde") increases by the BoE with more now seen as inevitable. Bailey, speaking at a [Wall Street](https://www.financedigest.com/disney-streaming-beats-wall-street-targets-earnings-miss.html "Disney streaming beats Wall Street targets, earnings miss") Journal (WSJ) event, said the fall in April’s inflation rate was “welcome” but the BoE had to focus on food prices which were up 19.0% over the 12 months to April, and core inflation which gathered steam. While [inflation expectations](https://www.financedigest.com/exclusive-german-govt-expects-inflation-to-surge-to-2-9-in-2021-source.html "Exclusive-German govt expects inflation to surge to 2.9% in 2021 – source") were falling and companies were sending signals that they intended to slow their price increases, there were risks that inflation would fall only slowly from now on, he said. Food companies had signed up for contracts that represented higher-than-usual costs after last year’s energy price surge, meaning a fall in raw material prices could take a long [time to work](https://www.financedigest.com/time-is-money-working-hours-and-salary-the-main-career-change-considerations.html "Time is money: working hours and salary the main career-change considerations") its way through to consumers. “The question for us is how … sticky and stubborn is this sort of process down, and bear in mind we’ve got a very tight [labour market](https://www.financedigest.com/spains-labour-market-resilient-as-unemployment-drops-in-nov.html "Spain’s labour market resilient as unemployment drops in Nov") in this country,” Bailey said. But he said the word “spiral” was not the best [way to describe how wage pressures](https://www.financedigest.com/the-sky-is-no-limit-for-vaisala-vaisalas-pressure-and-humidity-sensors-are-soon-again-on-their-way-to-space.html "The Sky Is No Limit for Vaisala: Vaisala’s Pressure and Humidity Sensors Are Soon Again on Their Way to Space") and inflation were interacting. ## RATE HIKES AHEAD Investors appeared to have made up their minds already about the job ahead for the BoE, pricing another quarter-point rate hike [next month](https://www.financedigest.com/ferry-industry-celebrates-fifth-successive-year-of-growth-for-car-travel-by-sea-and-four-new-ships-launching-in-next-twelve-months.html "Ferry industry celebrates fifth successive year of growth for car travel by sea And four new ships launching in next twelve months") as a 100% certainty and putting a roughly 50-50 chance on Bank Rate hitting 5.5% by November, up from 4.5% now. [Bank of America and Japanese bank Nomura said they now expect the BoE to raise its main interest](https://www.financedigest.com/research-reveals-upsurge-of-interest-among-consumers-online-for-alternative-banking-providers.html "Research Reveals Upsurge Of Interest Among Consumers Online For Alternative Banking Providers") rate three more times to 5.25% by September, while Credit Suisse and Citi see two more increases to 5%. Many other monetary authorities are also grappling with how much more [needs to be done to tame inflation](https://www.financedigest.com/investors-will-need-risk-assets-to-beat-inflation-in-2018.html "Investors will need ‘risk assets’ to beat inflation in 2018"). The [European Central Bank has committed to raising borrowing costs](https://www.financedigest.com/january-windstorms-expected-to-cost-european-insurers-more-than-2bn-according-to-aon-catastrophe-report.html "January windstorms expected to cost European insurers more than bn, according to Aon catastrophe report") again in June and a long list of policymakers have said that another move in either July or September is likely. But the U.S. Federal Reserve is seen as possibly having hit a peak for borrowing costs with the [next move most likely a cut later this year](https://www.financedigest.com/voice-assistants-set-to-revolutionize-commerce-and-become-a-dominant-mode-of-consumer-interaction-in-the-next-three-years.html "Voice assistants set to revolutionize commerce and become a dominant mode of consumer interaction in the next three years"), according to investors. Asked at the WSJ event if Prime Minister [Rishi Sunak](https://www.financedigest.com/pm-rishi-sunak-sets-out-priorities-for-britain-responds-to-critics.html "PM Rishi Sunak sets out priorities for Britain, responds to critics") was on target to halve inflation this year, as he has promised voters, Bailey said it was too soon to be certain. “I think we’re going to have to see how the news and the evidence unfolds,” he said. Bailey reiterated the BoE’s message of recent months that it is watching the [economic data](https://www.financedigest.com/european-bourses-steady-as-focus-remains-on-key-economic-data.html "European bourses steady as focus remains on key economic data") when making rate decisions, having signalled previously that it was likely to keep on raising borrowing costs. Our commitment is absolute that we will [bring inflation](https://www.financedigest.com/ecb-engaged-in-bringing-down-inflation-to-2-in-two-to-three-years-from-now-villeroy.html "ECB engaged in bringing down inflation to 2% in two to three years from now – Villeroy") back down to target,” he said. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---