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| Bank warns of inflation danger from firms raising prices | |
| (35 minutes later) | |
| Raising prices could drive up the cost of living even further and would hurt the least well-off most, the Bank of England governor has warned firms. | |
| "If all prices try to beat inflation we will get higher inflation," Andrew Bailey told the BBC's Today programme. | "If all prices try to beat inflation we will get higher inflation," Andrew Bailey told the BBC's Today programme. |
| He warned interest rates would rise again if prices continued to increase. | He warned interest rates would rise again if prices continued to increase. |
| Mr Bailey was speaking a day after the Bank raised interest rates to their highest level for 14 years after prices jumped unexpectedly last month. | Mr Bailey was speaking a day after the Bank raised interest rates to their highest level for 14 years after prices jumped unexpectedly last month. |
| "I would say to people who are setting prices - please understand, if we get inflation embedded, interest rates will have to go up further and higher inflation really benefits nobody," he said. "It hurts people and it particularly hurts the least well-off in society." | |
| Soaring inflation in the UK and around the world has been squeezing households' finances as energy and food prices rise. | Soaring inflation in the UK and around the world has been squeezing households' finances as energy and food prices rise. |
| Cost of living pressures hit the least well-off hardest, because they spend a bigger part of their income on food and fuel. | Cost of living pressures hit the least well-off hardest, because they spend a bigger part of their income on food and fuel. |
| The Bank has been steadily increasing interest rates as it seeks to make borrowing money more expensive and encourage people to spend less, with the aim of stopping prices rising so quickly. | The Bank has been steadily increasing interest rates as it seeks to make borrowing money more expensive and encourage people to spend less, with the aim of stopping prices rising so quickly. |
| But higher interest rates also hit some people with existing loans such as mortgages. | But higher interest rates also hit some people with existing loans such as mortgages. |
| What the interest rate rise means for you | What the interest rate rise means for you |
| Mr Bailey said firms should bear in mind that the rate of inflation is likely to drop sharply this year. | Mr Bailey said firms should bear in mind that the rate of inflation is likely to drop sharply this year. |
| He said he had not yet seen evidence of companies putting up prices more than necessary, and said that he understood they needed to "reflect the costs they face". | He said he had not yet seen evidence of companies putting up prices more than necessary, and said that he understood they needed to "reflect the costs they face". |
| Reacting to Mr Bailey's warning, Martin Williams, chief executive of Rare Restaurants, which includes the chains Gaucho and M, said that businesses had already been restrained in raising prices. | Reacting to Mr Bailey's warning, Martin Williams, chief executive of Rare Restaurants, which includes the chains Gaucho and M, said that businesses had already been restrained in raising prices. |
| "If restaurants had reflected the increased 'costs they face' in the past year as Mr Bailey suggests, a simple side salad would be priced at £20," Mr Williams said, adding that beer would be £20 per pint, and a small steak would be £100. | "If restaurants had reflected the increased 'costs they face' in the past year as Mr Bailey suggests, a simple side salad would be priced at £20," Mr Williams said, adding that beer would be £20 per pint, and a small steak would be £100. |
| He said restaurant owners had "responsibly tried to balance keeping pricing low, and keeping their businesses viable" while facing surging wage, food and energy bill costs. | He said restaurant owners had "responsibly tried to balance keeping pricing low, and keeping their businesses viable" while facing surging wage, food and energy bill costs. |
| Energy bills support for businesses will become less generous from April, with trade group UK Hospitality saying in January that would lead to an 82% rise in bills for firms such as pubs, restaurants and hotels. | Energy bills support for businesses will become less generous from April, with trade group UK Hospitality saying in January that would lead to an 82% rise in bills for firms such as pubs, restaurants and hotels. |
| "That's going to hit entrepreneurs, start-up businesses incredibly hard," said Mr Williams. "The impact will be the closure of restaurants." | "That's going to hit entrepreneurs, start-up businesses incredibly hard," said Mr Williams. "The impact will be the closure of restaurants." |
| A spokesperson for the Department for Energy Security and Net Zero said: "The government has provided an unprecedented package of support, enabling some businesses to pay around half of predicted wholesale energy costs last winter, and we've pledged further support from April onwards through our Energy Bills Discount Scheme." | A spokesperson for the Department for Energy Security and Net Zero said: "The government has provided an unprecedented package of support, enabling some businesses to pay around half of predicted wholesale energy costs last winter, and we've pledged further support from April onwards through our Energy Bills Discount Scheme." |
| Dan Davies, a managing director at Frontline Analysts who used to work for the Bank, said its strategy for lowering inflation "will bring the economy into balance, but you might not like the way in which that happens". | Dan Davies, a managing director at Frontline Analysts who used to work for the Bank, said its strategy for lowering inflation "will bring the economy into balance, but you might not like the way in which that happens". |
| "All they [the Bank] can do is inflict a bit of economic pain, reduce demand, and hope that it doesn't tip the economy into recession," he said. | "All they [the Bank] can do is inflict a bit of economic pain, reduce demand, and hope that it doesn't tip the economy into recession," he said. |
| Profiteering claim | Profiteering claim |
| Mr Bailey's comments came after Tesco chairman John Allan said in January that food firms may be using inflation as an excuse to hike prices further than necessary. | Mr Bailey's comments came after Tesco chairman John Allan said in January that food firms may be using inflation as an excuse to hike prices further than necessary. |
| Last year, Mr Bailey called on workers to not ask for big pay rises, sparking a backlash from unions. | Last year, Mr Bailey called on workers to not ask for big pay rises, sparking a backlash from unions. |
| The rate at which prices are rising remains close to its highest level for 40 years, hitting 10.4% in the year to February - more than five times the Bank of England's target. | The rate at which prices are rising remains close to its highest level for 40 years, hitting 10.4% in the year to February - more than five times the Bank of England's target. |
| Higher food prices are one of the main drivers fuelling overall inflation, with the cost of everyday basics such as eggs, cheese and milk rising sharply. | Higher food prices are one of the main drivers fuelling overall inflation, with the cost of everyday basics such as eggs, cheese and milk rising sharply. |
| Despite price rises, official figures showed that retail sales volumes rose by 1.2% in February, the biggest monthly gain since October last year. | Despite price rises, official figures showed that retail sales volumes rose by 1.2% in February, the biggest monthly gain since October last year. |
| Discount department stores had strong sales, and sales in food shops also rose. | Discount department stores had strong sales, and sales in food shops also rose. |
| However, there was some evidence of people spending less in pubs and restaurants due to cost of living pressures, the Office for National Statistics said. | However, there was some evidence of people spending less in pubs and restaurants due to cost of living pressures, the Office for National Statistics said. |
| How can I save money on my food shop? | How can I save money on my food shop? |
| Look at your cupboards so you know what you have already | Look at your cupboards so you know what you have already |
| Head to the reduced section first to see if it has anything you need | Head to the reduced section first to see if it has anything you need |
| Buy things close to their sell-by-date which will be cheaper and use your freezer | Buy things close to their sell-by-date which will be cheaper and use your freezer |
| Read more tips here | Read more tips here |
| Related Topics | Related Topics |
| Inflation | Inflation |
| Bank of England | Bank of England |
| Andrew Bailey | Andrew Bailey |