UK business minister defends wages stance, says BoE can handle inflation

British Foreign Secretary for Economic Affairs, Energy and Industrial Strategy Kwasi Kwarteng speaks to the media on September 21, 2021 in Westminster, London. REUTERS / Hannah McKay

LONDON, Oct 10 (Reuters) – The UK government is right to focus on raising wages, Economy Secretary Kwasi Kwarteng said Sunday, expressing confidence in the Bank of England’s ability to contain rising inflation.

BoE Governor Andrew Bailey said he was concerned that inflation was above the bank’s 2.0% target and described the need to prevent rising prices from being anchored permanently. Continue reading

During an interview with Times Radio, which focused on rising energy costs and supply chain disruptions due to labor shortages, Kwarteng was asked if people should start preparing for a rate hike to fight inflation.

“The bank is independent and will have an opinion,” he said. “The main motive for the bank will be to try to contain inflation. I think they will do well and we need to make sure we can contain any increases in the cost of living.”

In its September policy statement, the BoE raised its end-of-year inflation forecast to over 4%, and the bank’s chief economist warned that the magnitude and duration of the surge is proving to be greater than expected. Continue reading

But Kwarteng defended the Conservative government’s plans to turn Britain into a high-wage economy, as Prime Minister Boris Johnson pointed out in a speech last week. Continue reading

Johnson’s new economic model includes the argument that the best response to labor shortages in industries like transportation is for companies to raise wages rather than allow higher immigration.

“I think rising costs should always worry a business department. But I also think … we need to focus on higher wages,” said Kwarteng.

Reporting by William James Editing by Frances Kerry

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