Bank of England's Huw Pill says Brits need to accept 'we're all worse off'
LONDON — Companies and workers are trying to pass the impact of inflation onto each other — and that risks persistent inflation, according to Huw Pill, the Bank of England's chief economist.
"What we're facing now is that reluctance to accept that yes we're all worse off, we all have to take our share," Pill said on an episode of Columbia Law School and the Millstein Center's "Beyond Unprecedented" podcast, released on Tuesday.
"To try and pass that cost on to one of our compatriots and say, we'll be alright but they will have to take our share — that pass the parcel game ... is one that is generating inflation," he said.
Pill was discussing the "series of inflationary shocks" that had fueled inflation over the last 18 months, from pandemic supply disruption and government household support programs boosting demand, to the Russian invasion of Ukraine and resulting spike in European energy prices. That has been followed by adverse weather and an outbreak of avian flu driving up food prices.
But Pill said that was not the whole story, and that it was "natural" that the behavior of price-setters and wage-setters in economies including the U.K. and U.S. would change when living costs such as energy bills rise, with workers asking for higher salaries and businesses raising prices.
"Of course, that process is ultimately self-defeating," said Pill.
He added that the U.K., which is a net importer of natural gas, faced a situation where the goods it buys from the rest of the world had gone up a lot relative to what it is selling to the rest of the world, primarily services. The U.K. imports nearly half its food.
"If what you're buying has gone up a lot relative to what you're selling, you're going to be worse off," Pill said.
Source: CNBC
