*Andrew Bailey, Governor of the Bank of England  has cautioned companies that increasing prices will also heighten inflation, and as such ‘higher inflation really benefits nobody’ as the UK Bank’s MPC jacked up interest rates from 4 percent to 4.25 percent

Isola Moses | ConsumerConnect

As the country moves to control inflation, Andrew Bailey, Governor of the Bank of England (BoE), has opined if companies raise prices to beat inflation, the result will be more inflation and higher interest rates in the economy.

Bailey was speaking after the BoE’s Monetary Policy Committee (MPC) raised interest rates from 4 percent to 4.25 percent, following a surprise jump in inflation February 2023, reports Reuters.

The Governor of BoE stated: “I would say to people who are setting prices — please understand if we get inflation embedded, interest rates will have to go up further and higher inflation really benefits nobody.

“If all prices try to beat inflation, we will get higher inflation.”

The BoE, report said, has been steadily increasing interest rates for more than a year, as it moves to reduce demand in the UK economy and bring down inflation.

Bailey further explained: “We think inflation will fall sharply, really from the early summer, throughout the rest of the year.

“We’ve not got to the point yet where we’ll get the sharp fall that we expect. But we’ve got to see that happen.

“And when determining prices in the economy, it’s important to have that in mind.”

However, the Bank was said to have given a ‘surprise upgrade’ to its forecast for the UK economy Thursday, March 23.

The BoE noted it now expects fractional growth in the second quarter of the year, having predicted last month it would decline by 0.4 percent.

By implication, the UK would avoid imminently falling into a recession, defined as two consecutive quarters of negative growth.

The BoE Governor said: “The prospects for growth in the economy are now considerable better.

“And I think it is reasonable to say that there is a pretty strong likelihood that we will avoid recession this year. “But we’ve still got to put in place the conditions for much stronger and sustainable growth in the economy.

Retail sales jump February 2023

Meanwhile, retail sales indicated a surprise jump last month, according to the Office for National Statistics in the UK.

Retail sales volumes rose by 1.2 percent February, amid strong sales in discount department stores, according to report.

Analysts had been predicting a rise of only 0.2 percent.

But compared the same month last year, sales volumes were 3.5 percent lower.

Also, looking at the broader picture, sales volumes fell by 0.3 percent in the three months to February when compared with the previous three months, the ONS said.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The wider ramifications for stores need to be considered here, the depth of strength on the discount side spells trouble for margins, which are already under serious pressure in the industry.”

UK consumers are feeling more confident than they have done in some time, report stated.

The GfK Consumer Confidence indicator rose to minus 36 March 2023, the highest point in a year.

However, while recent sunnier predictions for the economy have lifted the mood of consumers, the number itself remains low, as they continue to face the challenging conditions of the cost-of-living crisis in the country.