Shocks hitting the UK worse than in 1970s: Guv Bailey

Bank of England Governor Andrew Bailey said the turmoil hitting the UK is worse in economic terms than what hit in the 1970s. Russia's attack on Ukraine and the supply chain turmoil following the pandemic have had a bigger impact on real incomes than the energy crisis of four decades ago, Bailey said at a press conference Thursday. "This is a huge shock," Bailey said. "If you compare this to the 1970s, and you compare this year to single years in the 1970s, and also government policies comes into play there in terms of energy markets. This is a bigger shock than in any year in the 1970s."

The remarks underscore why the UK central bank is signalling a more cautious approach toward raising interest rates than the Federal Reserve in the US. The BOE raised its benchmark lending rate at the sharpest pace in 33 years on Thursday but pushed back on market expectations for rapid further increases. Bailey said the US and UK are facing very different circumstances, with the rise in electricity and natural gas prices in Europe likely to restrain the economy and take some of the wind out of inflationary pressures.