Cost of living crisis: More inflation rises to come, warns former Bank of England boss

4 February 2022, 08:12

Ex-Deputy Governor of the Bank of England speaks to LBC

By Daisy Stephens

The former Deputy Governor of the Bank of England has told LBC there are more inflation rises to come, as millions of Brits feel the effects of the spiralling cost of living crisis.

Listen to this article

Loading audio...

Speaking to Nick Ferrari at Breakfast, Sir John Gieve said the Bank was worried price increases would "spread from energy prices and food into wages and across the economy generally" in a "spiral" effect where even higher interest rates are required.

When Nick asked if there would be another rise soon, Sir John said: "I'd be very surprised if there isn't.

"And the markets now expect interest rates to go up to, say, 1.5 per cent by the end of this year.

Read more: 'We have to live within our means': Sunak defends 'puny' Govt support amid energy crisis

Read more: Cost of living crisis: How will the energy price cap rise affect you?

"I think it could even go further."

When Nick pressed him on what inflation could rise to, Sir John said 2-3 per cent was "not out of the question" but highlighted that it was very dependent on what happened to wages.

If wages did not substantially increase, he said, "we'll have a miserable 2022 with lower real incomes, but inflation will come down sooner".

Chancellor Rishi Sunak explains the measures to ease the energy crisis

It comes after the Governor of the Bank of England urged workers not to ask for a big pay rise in order to control inflation.

His comments have been criticised by some, with many pointing out that he earns more than half a million pounds a year.

Andrew Bailey said the UK needed to see "some moderation of wage rises" - something he conceded was "painful" - in order to prevent inflation from "spreading".

"What we can do is try to prevent inflation spreading and becoming more engrained in the system," Mr Bailey told the BBC.

When asked if he was telling people not to ask for "too high" a pay rise, he said: "Broadly, yes."

Mr Bailey was paid £575,538, including pension, in the year from March 1 2020.

Sir John said he could "imagine" people would take issue with the comments but defended Mr Bailey, saying: "What he was trying to say was that in the past when inflation has really got going - as it did 30 years ago - it was because wages changed prices, that led firms to put up their own prices, and then you've got a spiral developing."

Read more: Boris Johnson took private jet to Blackpool despite 3-hour train journey, LBC reveals

Read more: Party's over at No10 as four top aides quit and Rishi takes swipe at Boris

Millions of Brits are feeling the squeeze of the cost of living crisis.

On Thursday, Ofem announced it was raising the price cap on energy by £693 per year to £1,971.

As well as facing a 54 per cent increase in gas bills, Brits are also seeing surges in the price of necessities such as food and petrol.

And, also on Thursday, the Bank of England announced it was doubling interest rates to 0.5 per cent - which penalises borrowers and encourages people to save money rather than spend it.

More Nick Ferrari

See more More Nick Ferrari

Tory Work and Pensions Secretary Mel Stride was put on the spot by an LBC listener from a "Blue Wall" constituency rained down a barrage of complaints about soaring mortgages, the NHS crisis, crumbling schools and roads, and dentist shortages.

'Why would anyone sane vote for the Tories?': Minister put on the spot with barrage of complaints from LBC listener

Mr Weatherall's lost medals

Nick Ferrari offers £500 reward for return of RAF veteran's medals lost yesterday in Ranville, France

Kemi Badenoch rules out serving alongside Nigel Farage after he hints at Tory takeover.

Nigel Farage 'wants to destroy the Conservative Party', Kemi Badenoch tells LBC

'We've got to give these people justice': Ministers vow to address any criminal wrongdoing in infected blood report

'We've got to give these people justice': Ministers vow to address any criminal wrongdoing in infected blood report

'Minuscule state' of RAF is 'utterly pathetic' meaning just one plane available for D-Day 80th anniversary parachute jumps

'Minuscule state' of RAF is 'utterly pathetic' with just one plane available for D-Day 80th anniversary parachute jumps

Chancellor brands Labour plan to tackle small boat crossings 'absolute joke' which will 'encourage more people to come'

Chancellor brands Labour plan to tackle small boat crossings 'absolute joke' which will 'encourage more people to come'

Former immigration minister Robert Jenrick said Conservative voters were "on strike" and needed Rishi Sunak's government to be honest about the mistakes that have been made.

Tory voters are 'on strike' and Sunak needs to be 'honest' to keep them on side, Robert Jenrick says

The UK government is 'deeply concerned' about the assault on the Rafha crossing in Gaza and wants to see a 'credible military plan' from Israel.

UK government 'deeply concerned and need to see credible military plans' after Israeli offensive on Rafah crossing

Met chief Sir Mark Rowley has said that anyone using a 'swastika in the context of the Middle East crisis' will be arrested.

Met police chief pledges to arrest protesters using swastikas at Gaza protests

Sir Mark Rowley said filming interactions with police at protests had become "intrusive".

Filming police at protests is 'physically intrusive' and 'escalates situations', says Met Commissioner

Kemi Badenoch has launched a 'call for input'.

Gender-neutral toilets could lead to ‘schoolgirls getting UTIs because they don't want to share’, minister says

Met police commissioner Sir Mark Rowley spoke on LBC on Wednesday

Female officer’s hand reattached as Met chief reveals horror injuries suffered by police in Hainault sword attack

LBC observed how Scotland Yard manages to police divisive demonstrations in London

'It makes our job incredibly difficult': Police surrounded by cameras on protests as they make ‘on the hoof’ law changes

Nick Ferrari spent the day in the Met Police Operations Control Room

Nick Ferrari goes behind the scenes at the Met Police's massive efforts to keep the peace at heated protests

John Cleese has said he's 'all in favour of content warnings'.

‘I’m all in favour of trigger warnings’, John Cleese tells LBC as he says ‘society has changed’

Two of the Household Cavalry horses are 'in serious condition' and there are concerns they may never fully recover

'Seriously injured' horses undergo emergency operations after London rampage - as one recovers in equine hospital