The Bank of England, the target of all criticism with inflation at 10%

The Bank of England is receiving criticism from the government, economists and former leaders of the institution, who accuse it of having rested on its laurels and allowing inflation that is the highest in the G7.

Inflation was 10.1% year-on-year in July in the UK, a 40-year high that far exceeds the central bank's target of 2%.

The Bank of England (BoE) expects it to continue rising in the coming months, reaching 13%, which will aggravate the loss of purchasing power that threatens to throw many households into poverty.

"It is clear that something has gone wrong," said the Minister for Business, Energy and Industry, Kwasi Kwarteng, in an interview with the Sky News chain, in which he considered that "interest rates should have been raised a little earlier".

In turn, the favorite of the polls to succeed the conservative Boris Johnson in Downing Street, Foreign Secretary Liz Truss, has proposed revising the statute of the Bank of England, whose independence dates back to 1997.

In the face of criticism, the Governor of the Bank of England, Andrew Bailey, stated that he did not want to enter the debates of the Conservative Party.

But at the same time, he admitted that the UK's financial credibility depended on the independence of its Central Bank.

Bailey also recalled that the BoE raised its rates at the end of 2021, before the US Federal Reserve or the European Central Bank.

But like the European Union, the UK is suffering from the energy crisis caused by the Russian invasion of Ukraine. Added to this are the interruptions in supply chains and the lack of workers as a result of Brexit.

Bailey argues that inflation has also accelerated due to the new wave of Covid-19 infections, despite the fact that there were no longer strict lockdowns.

"It is true that inflation is high this year, but the message is the same: in eight centuries, independence is the best way to have a measured and stable inflation," said a member of the monetary committee, Jonathan Haskel, on Twitter.

- 'A bit slow' -

But the rebuke is not limited to the Conservative Party.

Former Bank officials believe that if the institution had raised rates earlier -- when growth was stronger -- a painful tightening of monetary policy would have been avoided.

The Bank of England "doesn't have an easy job at the moment, but it has tools at its disposal, particularly interest rates, and it's a bit slow to raise them," criticizes Andrew Sentance, a former member of the monetary policy committee.

These restrictive policy advocates would like the Bank to raise rates to curb borrowing and thus prevent inflation from triggering wage demands fueled by rising energy prices.

"We were very, very slow to see the train come out of the tunnel, a lot of people were run over and now we have to deal with the consequences," said Stuart Rose, president of the Asda supermarket chain and a Conservative member of the Upper House of Parliament. parliament.

For him, the priority should be "killing inflation" instead of favoring growth. The strongest criticism of him goes to Truss, who accuses him of wanting to "throw money everywhere", which feeds inflation.

But on the other hand, the tight monetary policy does not generate unanimity.

"The relatively high rate of inflation in the UK is due to budget policy and Brexit," says Samuel Tombs, an economist at Pantheon Macroeconomics, who believes that raising interest rates will not solve the problem.