BoE's COVID policy not to blame for inflation, Bailey says

Governor of the Bank of England Andrew Bailey adjusts his glasses as he addresses the media on the Monetary Policy Report at the Bank of England in London, Britain May 5, 2022. Frank Augstein/Pool via REUTERS

VIENNA, May 23 (Reuters) - Governor Andrew Bailey on Monday pushed back against his critics who blame the Bank of England for allowing inflation to accelerate to a 40-year high, saying the facts do not support this.

The British central bank has been accused by lawmakers in Prime Minister Boris Johnson's ruling Conservative Party and even by former governor Mervyn King of being too slow to halt a rise in consumer prices that are up 9% compared with a year ago.

Bailey, speaking at a conference hosted by Austria's central bank, said the BoE judged the extent of recent interest rises to be appropriate given the coming hit to demand from soaring energy prices.

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"What I reject is the argument that in our response to Covid the Bank's Monetary Policy Committee let demand get out of hand and thus stoked inflation. The facts simply do not support this," Bailey said.

He pointed to the fact that economic output in March was just 0.6% above its pre-pandemic level, and far behind where it should be had the economy continued to grow uninterrupted by a pandemic.

"What we do have is a very tight labour market. But that does not look like a story about rapid demand growth," Bailey said.

Britain has the highest inflation of Europe's big economies and in the Group of Seven.

Former governor King last week told Sky News that too much money printing during the pandemic was a major cause of the high inflation now widespread across major economies. read more

Most economists say widespread supply chain disruption caused by the pandemic, coupled with increased spending on goods when services like travel and tourism were shut down, are the main culprits.

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Reporting by Francois Murphy, writing by David Milliken, editing by Andy Bruce

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