Andrew Bailey changes tune on pay to support rises for lowest-earning workers

ANDREW BAILEY has praised companies for directing pay rises towards lower-paid staff after previously urging workers not to ask for higher wages this year.

During a two-day visit to meet businesses in the North, the Bank of England Governor said it was “sensible” to target salary increases toward the worst compensated employees.

The comments mark a shift in tone after Mr Bailey said in February that “moderation” of wage rises was essential in order to get a grip on spiralling inflation. The stance was widely ridiculed as tone deaf, with commentators pointing out that the Governor was being paid more than £500,000 for his job overseeing UK monetary policy.

In an interview with Business Live, Mr Bailey said: “Quite a few businesses are saying to me that they are doing more to direct their pay rises to the lower paid, and I think that is sensible.

“I wouldn’t direct them to do that, it’s not for me to do that but when I talk to businesses, I can understand why they’re doing that.”

Bringing inflation down will likely take between 18 months and two years, Mr Bailey also said. He expects it to peak over the winter and fall next year.

He said: “Inflation is bad for the least well-off generally and this inflation is particularly bad. The reason is that it’s concentrated on energy and food – these are the essentials of living.” Food inflation is at its highest in 40 years at 15pc, with mortgages and rent sky-high.

However, Silvana Tenreyro, an external member of the Bank of England’s monetary policy committee, warned yesterday there was a risk of overdoing rate increases. She said rate setters would likely cut in 2024 to stop inflation from falling below the 2pc target.

Ms Tenreyro said the Bank should be more cautious with the “fastest tightening in policy in the MPC’S history”, warning that “too high a path for Bank Rate risks oversteering inflation below target in the medium term”.