‘Buck stops with Bailey,’ says economist as homeowners reel from interest rate hike

Andrew Bailey, Governor of the Bank of England, must ultimately be held responsible for the controversial and potentially damaging decision to increase interest rates to five percent, an economist has said, explaining: “The buck stops with him.”

And Julian Jessop also believes the bank had been left with little choice after a series of “policy mistakes” which he believes have badly damaged its credibility.

The Bank unexpectedly pushed up the figure up by half a percentage point to the highest level in almost 15 years, with the move likely set to deepen the mortgage crisis as the cost of borrowing costs goes up for the 13th time in a row.

Speaking today, Prime Minister Rishi Sunak said the increase had been necessary to try and “get a grip” on the current inflation figure of 8.7 percent – while acknowledging the impact on already cash-strapped Britons.

Mr Jessop, Economics Fellow at the free market think tank The Institute of Economic Affairs, told Express.co.uk:

“I would not necessarily single out Andrew Bailey.

“There are nine members on the Monetary Policy Committee and they rely on economic forecasts made by Bank staff.

“But Bailey is the Governor of the Bank, so the buck has to stop with him.”

He continued: “A more credible central bank might have been able to leave interest rates on hold today.

“Indeed, two members of the Monetary Policy Committee (MPC) voted to do just that.”

The full impact of previous rate increases has yet to be felt and there were still good reasons to expect inflation to fall sharply over the remainder of the year, including the rapid deceleration in the growth of money and credit, Mr Jessop reasoned.

However, he added: “Unfortunately, confidence in the Bank is low after a series of policy mistakes, forecast errors and communication blunders.

“This MPC was forced to raise rates by an unexpected half a point to demonstrate that it is serious about getting inflation back down – along with signalling that further rate rises could be on the way.

“It is uncertain that rates will have to go up again.

“The bigger increase today may have bought the MPC a little more time.

“Clearer evidence that underlying price pressures are fading should mean that the peak in UK interest rates will be nearer the current level of 5 per cent than the 6 per cent or more that many fear.”

Speaking at the Times CEO summit in London, Mr Sunak said: “I always said this would be hard and clearly it’s got harder over the past few months but it’s important that we do do that.

“The Government is going to remain steadfast in its course and stick to its plan to do that.”

Justifying the decision, Mr Bailey said inflation is “still too high and we’ve got to deal with it”.

He added: “We know this is hard – many people with mortgages or loans will be understandably worried about what this means for them.

“But if we don’t raise rates now, it could be worse later.”