Bailey: Businesses trying not to pass costs on to consumers
Bank of England governor Andrew Bailey has said businesses are resisting decisions to pass higher energy costs onto consumers and instead looking to narrow margins and find other savings. Speaking at an International Monetary Fund event in Bangkok, Bailey said firms were “clearly squeezing margins as well as cost cutting” in order to deal with [...]
Bank of England governor Andrew Bailey has revealed that businesses are reluctant to pass on higher energy costs to consumers, instead focusing on reducing margins and finding additional savings. Speaking at an International Monetary Fund event in Bangkok, Bailey explained that firms are "clearly squeezing margins as well as cost-cutting" to manage the surge in energy prices.
With oil and gas prices surging over the past two weeks due to ongoing Middle Eastern conflicts, Bailey noted that it is becoming increasingly challenging for companies to control their own product prices as potential cost-cutting opportunities dwindle. He emphasized that the longer the energy situation persists, the more difficult it will be for businesses to pass on costs to consumers.
The Bank of England's Monetary Policy Committee is set to determine whether to raise interest rates during the first week of November, shortly after Chancellor John Healey presents his inaugural Budget. Bailey's plea for stronger economic growth Policymakers on the nine-member committee have expressed growing concerns over inflation and the impact of rising business costs on consumer goods and services.
As a result, household energy prices are anticipated to increase by at least 16% in January, surpassing October's rise and pushing the Ofgem annual energy price cap near £2,000. The Bank's projection suggests inflation could exceed four percent within the first months of 2027. At the previous meeting, officials voted 6-3 to maintain interest rates at 3.75 percent.
Megan Greene, who advocated for raising the rate to four percent, argued that robust growth could bolster the case for tighter monetary policy, given the intensifying pressures on activity and pricing across the UK economy. During the Bangkok gathering, Bailey pointed out that higher interest rates have helped curb household income and dampen demand, contributing to inflation's reduction.
He also acknowledged that while GDP has grown faster than many economists anticipated, it remains "not as strong a growth as frankly we need."
Written by urgent.news from City AM's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
