The Bank of England warns that Brexit contributes to triggering inflation
Swati Dhingramember of the Bank of England Monetary Policy Committeeadmitted this Wednesday that Brexit has contributed to raise prices and lower wages in the United Kingdom, in addition to slowing post-pandemic trade flows with respect to other advanced economies. “It is undeniable that we are seeing a much greater slowdown in trade in the UK compared to the rest of the world,” Dhingra told the committee of the House of Commons Treasuryin front of the one who appeared next to the governor of the central bank, Andrew Bailey.
For the economist, the output of the European Union (EU) has pushed real wages 2.6% below what they could have been, while has made food more expensive in the country by around 6%. The UK consumer price index (CPI) stood at 11.1% in October, compared to 10.1% in September, the highest level in 41 years, the National Statistics Office (ONS) reported on Wednesday. )
Bailey, for his part, stressed that the bank maintains its analysis that Brexit can have an impact of around 3% in the British economy. “As a public official I am neutral on Brexit itself, but I am not neutral to say that those are the most likely economic effects,” he said.
The governor of the issuing bank also stressed the “dramatic difference” between the evolution of British GDP after the coronavirus pandemic compared to other advanced countries. The size of the UK economy has decreased by 0.7% compared to the end of 2019while that of the eurozone is 2.1% higher and that of the US is 4.2% higher, Bailey said.
A ‘shock’ in the labor market
“There are many factors that contribute” to this evolution, said the governor, one of them being the drop in the number of active workers after the pandemic. “The United Kingdom is the only OECD country in which this ‘shock’ is registered in the labor market“, he claimed.
Bailey also indicated that the United Kingdom has damaged his “international reputation” due to the aggressive tax cut that former Prime Minister Liz Truss was forced to withdraw after causing a storm in the financial markets. “It will cost more to rebuild that reputation than to correct the curve of the cost of debt,” said the governor of the Bank of England.
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