Andrew Bailey, the Governor of the Bank of England spoke yesterday of the possible need for the Bank to continue to raise interest rates although nothing is decided in advance of the next Monetary Policy Committee meeting.

While he is relieved to see the cost of living crisis begin to ease, there is still work to be done to ensure that inflation does not become ingrained in the economy as it has in the past.

There has been a significant improvement in economic activity since the turn of the year but the rise in wages is a concern although he can understand that workers, especially in the public sector, want to see their salaries keep up with the cost of living. Making demands for inflation busting increases will create a wages/prices spiral which will not benefit anyone.

There is no easy way to bring down inflation and the bank of England is cooperating with the treasury to ease the burden of sky high inflation. The Bank Of England will continue to raise interest rates as long as it deems it necessary to do so, although it is forecast that it will fall naturally this year as the global economy develops.

Bailey was at pains to suggest that nothing is cast in stone and the Central Bank is driven by the incoming data although it is in no one's interests to make policy decisions based upon a single month’s data but rather studying the trend.

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