Speaking on a podcast in the United States, Pill noted that there is a reluctance to accept that people in the UK are worse off. In response to higher bills and increasing costs, workers have been seeking wage increases, while businesses have been charging more for their products or services. This, in turn, adds to inflation, making prices across the economy rise even further.
UK inflation currently stands at 10.1% in the year to March, much higher than the Bank of England’s target of 2%. The Bank has responded by increasing interest rates to make borrowing money more expensive, with the aim of reducing spending and cooling demand for goods, thus slowing down price rises. Despite this, pay increases have not kept up with inflation, resulting in people being worse off overall.
Pill’s comments about accepting that people are worse off have been echoed by other officials from the Bank of England in the past, including Governor Andrew Bailey. Last year, Bailey urged people not to ask for big pay rises to avoid prices rising out of control. However, these comments were met with criticism from unions and were later distanced from by Downing Street and the Treasury.
The high inflation rate in the UK is caused by a pass-the-parcel game where people try to maintain their real spending power by bidding up prices, according to Pill. This game generates inflation and causes prices to rise even further across the economy. With households facing soaring energy bills and food costs, many workers are asking for pay rises to ease the pressure on their budgets. While job vacancies are higher than they have been for decades, pay increases have still not kept up with the cost of living, resulting in people being worse off overall.
