The Governor of the Bank of England has warned that rising energy prices and “apocalyptic” food prices will cause “quite serious income shocks.”
Despite households being pummelling by surging inflation, Andrew Bailey said he felt “helpless” as he backed the Bank of England’s monetary policies.
Mr Bailey told MPs at the Treasury Select Committee on Monday that current inflation, which is at its highest level in 30 years, will affect consumer demand in the UK, leading to increased unemployment.
Inflation was recorded at 7% in March by the Office for National Statistics, and above 8% inflation is expected to be announced later this week.
Inflation is expected to peak at 10.25 percent in the fourth quarter of 2022, according to the Bank of England.
“The main driver of inflation and what brings it down is the very big, real income shock which is coming from outside forces and, particularly, energy prices and global goods prices,” Mr Bailey told MPs.
“That will have an impact on domestic demand and it will dampen activity, and I’m afraid it looks like it will increase unemployment.
He told the committee that “we are walking a very narrow path” between surging inflation and risks to growth.
He emphasised that the crisis in Ukraine has resulted in an unpredictably high rate of inflation, and that there is “significant concern” about further increases in food costs.
“The Ukrainian finance minister said is that there is food in store but they can’t get it out,” he told MPs.
“While he was optimistic about crop planting, as a major supplier of wheat and cooking oil, 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.
“Sorry for being apocalyptic but that is a major concern.”
Food inflation in the United Kingdom surged by 5.9% in March and is anticipated to rise more in the following months.