The Bank of England is in denial over its role in the inflation crisis
sir – Andrew Bailey, the Governor of the Bank of England, has said that the Monetary Policy Committee could not have anticipated the shocks he claims have caused such high rates of inflation (report, May 17).
For the past two years, however, economists have been warning that the massive expansion of the monetary base would lead to a surge in inflation. The oil-price shock and global supply-side constraints are, arguably, not the chief culprits but the effects rather than the cause.
We are facing the largest rise in inflation since the 1970s, yet neither the Bank of England nor the US Federal Reserve, which in 2020-21 printed money to an even greater extent, are willing to acknowledge their role in causing it.
Charles Ekins
Hurstbourne Priors, Hampshire
sir – This Government’s policies have contributed directly to the current high rate of inflation.
They include the pursuit of net-zero targets at all costs; an energy policy that failed to exploit our abundant natural resources; a lack of forethought on the security of energy supply; wasteful, unconditional cash injections into the NHS; and the removal of EU constraints across the United Kingdom.
Given the crisis in Ukraine, this Government should be urgently stepping up defence spending. Presumably it will blame the Bank of England for not doing that, too? Nigel Griffiths
Wareham, Dorset
sir – It is clear that monetary policy will not bring down inflation, given that its cause is dominated by supplyside rather than demand-side issues, and that raising interest rates is likely to drive hard-pressed households to cut spending, leading eventually to stagflation.
What is required is pay restraint in the short term and a long-term investment programme in energy and fuel provision, coupled with serious investment in the creation of skilled jobs in manufacturing and technology.
There isn’t a fix via monetary policy. The pain will continue.
Bill Morrison
Sandbach, Cheshire
sir – While it is undeniable that certain producers and suppliers are facing rising costs of raw materials and distribution, it is also clear that many businesses are quickly joining an inflation bandwagon.
In several cases, prices are being raised by 20 or 30 per cent, sometimes more, not because of a genuine need to cover increased costs, but rather due to a public expectation that inflation exists, which businesses can use as a convenient cover.
Just as “because of Covid” remains the catch-all excuse for poor service, even when that isn’t the true reason, “because of inflation” is quickly becoming the mantra for unjustified price rises.
Keith Whittaker