High inflation will stay persistent unless people accept that they are poorer, a senior UK central bank official has said.
The UK’s Consumer Prices Index inflation fell slightly to 10.1 percent in March from 10.4 percent in February, but remained in the double digits, according to the Office of National Statistics (ONS).
Huw Pill, chief economist of the Bank of England, blamed the persistent inflation partly on employees and businesses who have responded to higher bills and costs by asking for higher wages or charging their customers more money.
This, he said, adds to inflation, pushing up prices even further across the economy.
Speaking on the Beyond Unprecedented podcast from Columbia Law School, Pill said: “The UK—which is a big net importer of natural gas—is facing a situation where the price of what you’re buying from the rest of the world has gone up a lot, relative to the price of what you’re selling to the rest of the world, which is mainly services in the case of the UK.
“You don’t need to be much of an economist to realise that if what you’re buying has gone up a lot relative to what you’re selling, you’re going to be worse off.
“So, somehow in the UK, someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices whether through higher wages or passing energy costs on to customers, etc.
Read more: People Need to Accept They Are Poorer, Says Central Bank Economist