{
  "id": 12902241,
  "title": "Bailey: Governments must help control inflation too",
  "url": "https://urgent.news/2026/10/08/bailey-governments-must-help-control-inflation-too",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-10-08T15:46:52.000Z",
  "source": {
    "name": "City AM",
    "slug": "city-am",
    "url": "https://www.cityam.com/bailey-governments-must-help-control-inflation-too/"
  },
  "original_language": "en",
  "account": "Bank of England governor Andrew Bailey emphasized the need for governments to assist in maintaining stable prices and market confidence through disinflationary tax and spending policies. In an intervention on the correlation between monetary and fiscal policies, Bailey encouraged governments to consider the effects of government spending and borrowing on inflation. As the chair of the global Financial Stability Board, he stressed that governments should make decisions that commit to both price and financial stability. Bailey cautioned against commenting on fiscal policy, stating it was beyond the scope of central banking. At the Istanbul Economic Forum, he urged governments to exercise fiscal restraint and maintain a credible, direct commitment to stability, visible to markets. Bailey explained that a consistent policy stance could help mitigate the emergence of risk premia, particularly during major conflicts like the one in the Middle East. He also highlighted the importance of fiscal rules in securing stability outcomes, similar to inflation targets. Inflation is projected to increase after Chancellor John Healey's upcoming Budget. The Bank of England aims to keep CPI inflation at two percent, and Bailey had to inform the Chancellor when inflation exceeded three percent. In August, UK inflation was 3.1 percent, with the Bank anticipating it to surpass four percent due to soaring global energy prices. Brent crude oil prices surged from $90 to over $100 a barrel in the previous month. Bailey's remarks were particularly relevant for Healey as he prepares to address government spending in the upcoming Budget. Healey faces challenges in curbing spending amid higher debt interest payments while providing support to households and businesses grappling with rising living costs. Bailey cautioned that the longer energy prices remain elevated, the more challenging it would be for the Bank of England to view the situation as temporary. He noted that a \"look-through\" approach only works if inflation expectations stay anchored to the target. If households and firms incorporate the shock into their wage and price-setting behavior, temporary effects can quickly turn into persistent ones. Bailey also addressed the UK's specific issues, expressing concern about the risk of elevated inflation expectations based on recent years' history. The Bank is expected to raise interest rates to four percent at its next meeting, a week after the Budget. Several prominent economists and global bankers have warned about the consequences of high government borrowing levels. Kristalina Georgieva, the International Monetary Fund's chief, cautioned earlier this year that higher government debt levels leave countries vulnerable during economic downturns. The 10-year gilt yield, representing the UK's benchmark for government borrowing costs, has risen from around 4.2 percent in March to nearly 5.5 percent, significantly increasing the Healey administration's debt interest bill. Bailey cautioned that high leverage used for AI investments increases risks, although markets have not become \"disorderly.\" He emphasized the need for unwavering vigilance regarding the current state of financial markets.",
  "summary": "Bank of England governor Andrew Bailey has said that governments should look to help keep prices stable and win over markets with disinflationary tax and spending measures. In an intervention on the relationship between monetary and fiscal policy, Bailey urged governments to consider the impacts of government spending and borrowing on inflation. The Bank of [...]",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}