The chief economist of the Bank of England stressed on Tuesday that the British people must accept a decline in their purchasing power in the face of the historic cost of living crisis in order not to fuel inflation.
Huw Pill emphasized that while inflation was caused by shocks outside the United Kingdom from the Covid-19 epidemic and the war in Ukraine, it’s also reinforced by efforts by the British to maintain their standard of living, while companies increase their prices and employees demand increases in salaries.
According to Pill, “Somehow in the UK, people have to accept that their situation has worsened and stop trying to preserve their real purchasing power”.
“This reluctance to accept that we are in a worse situation… This breeds inflation,” he added.
These statements come at the height of the cost of living crisis and with inflation remaining above 10%.
The Bank of England has raised interest rates 11 consecutive times since late 2021, in an effort to control consumer prices.
Pill also noted that monetary policy must remain tight enough to curb inflation but warned that very high rates could cause significant damage to the economy.
The sterling pound lost 0.74% of its value against the US dollar, reaching 1.2395 at 14:55 GMT on Tuesday.