BoE economist apologizes for telling Brits to ‘accept’ being poorer

Pill was knocked over other economists, unionsand even his own boss last month after describing inflation as a “pass the packet” game on a podcast interview Produced by Columbia Law School. He explained that companies that raised prices, or individuals that demanded higher wages, passed on the effects of inflation to the wider economy, rather than simply reconciling themselves to being poorer than before.

“If the cost of what you’re buying has gone up compared to what you’re selling, you’re going to be worse off,” he said. “Somehow someone in the UK has to accept that they are getting worse and stop maintaining their real purchasing power by raising prices.”

Pill, meanwhile, tried to make amends a virtual question and answer session Monday night, where he admitted his choice of words was far from ideal. But while he took responsibility for his “seditious” statements, he also portrayed himself as a messenger tasked with the difficult task of conveying a reality that is difficult to sugarcoat.

“If I had another chance to use different words, I would use slightly different words to describe the challenges we all face,” he said.

“Although we have some difficult messages to deliver. I will try to get these messages across in a way that is perhaps less inflammatory than I may have managed in the past.”

The annual inflation rate in the UK is currently 10.1%with Food and drink prices The rate is particularly high at 19%, so it’s no surprise that Pill’s comments have largely fallen on deaf ears over the past month. Even Bank of England Governor Andrew Bailey spoke out last week to reassure Brits that the central bank is “very sensitive to the plight of people, of all people, but especially of people on lower incomes”. He also admitted that Pill’s choice of words was “not the right one”.

“I have to be honest and I think he would agree with me,” Bailey said.

In his apology on Monday, Pill said he and the central bank are aware “we live in difficult and challenging times” but acknowledged that the problems of high inflation are “particularly acute for some sections of society”.

But he also reiterated that one of his responsibilities was to bring these hard truths before the public. Pill stressed it was “important” to deliver messages about the reality of inflation in a “coherent and resilient manner” but also pointed out that the “viral backlash” to his earlier response in managing the central bank’s inflation communications was not helpful has been.

Pill’s comments highlighted an ongoing debate in both the UK and US over how central banks are fighting inflation. While Pill and Chairman of the Federal Reserve Jerome Powell Although many critics have pointed to rising wages as the main cause of inflation, some critics point to excessive corporate profits as the primary cause, a phenomenon known as “”.greed inflation.”

The greed inflation argument posits that companies will use existing inflation and other factors such as the pandemic and war in Ukraine as an excuse to raise their prices and increase their profit margins. Catherine Mann, a senior Bank of England official, warned in March that this could be the case for British companies exploit the cost of living crisis to boost profits during a March learn Unite, the country’s largest private sector union, found that average profit margins in the UK rose to 10.7% in the first half of 2022, from 5.7% in the first half of 2019.

However, other British economists have resisted the greed-flation narrative. In a note to clients this week, Michael Saunders, a senior economic adviser at Oxford Economics and a former central bank interest rate researcher, shared one of his corporate earnings analysis that pointed to it Most companies saw profits fall. Outside of oil and gas companies, “corporate profits as a percentage of GDP have fallen significantly,” Saunders wrote, adding that the recent spike in food inflation was likely due to “usual delays rather than profiteering.”