Rocketing inflation has ‘surpassed my worst expectations’, former Bank of England chief warns

·3-min read
File photo dated 15/10/21 of shoppers in a supermarket. Shop prices are up 2.7% on last year marking their highest rate of inflation since September 2011, figures show. The impact of rising energy prices and the conflict in Ukraine continued to feed through into April's retail prices, with no sign of them abating, according to the BRC-NielsenIQ Shop Price Index. Issue date: Wednesday May 4, 2022.
Former Bank of England governor Andy Haldane has said inflation could surpass his 'worst expectations'. (PA)

A former Bank of England (BoE) chief has warned that inflation has surpassed his "worst expectations" as the cost-of-living crisis deepens.

On Thursday, the BoE predicted that inflation is set to reach 10% later this year after it hit a 30-year high of 7% in the year to March – driving up the cost of essentials like food and fuel.

And in a grim warning former BoE chief economist, Andy Haldane, told LBC on Monday he feared that inflation could surpass the highs predicted by the Bank.

Read more: Cost of living crisis: The everyday food items that are soaring in price

"I think [inflation] could [pass 10%], I fear it might," said Haldane.

"This isn't a new thing, even this time last year... I was worried that price pressures were bubbling up. As it's turned out things have even surpassed my worst expectations.

"We're now looking prospectively at double digit interest rate of inflation, which is not quite getting back to the 1970s but getting on that way."

Inflation is at its highest level for 30 years. (ONS)

Haldane also said he is concerned high inflation is here to stay in the medium term, drawing out the fiscal pain for households.

"I'm slightly fearful it might stick around a while as well – this won't be come and gone in a matter of months," he said. "I think this could be years — rather than months."

The BoE raised UK interest rates to 1% on Thursday, its highest in 13 years, in an attempt to drive down rising inflation.

Read more: How does inflation affect interest rates?

In its Monetary Policy Report, the Bank warned household income in 2022 is projected to fall "by the second largest amount since records began in 1964".

“I recognise the hardship this will cause for many people in the UK, particularly those on the lowest incomes, often with little or no savings, who are hit hardest by increases in the prices of basic necessities like food and energy,” said BoE governor Andrew Bailey.

File photo dated 3/2/2022 of Bank of England boss Andrew Bailey who has called on banks to use restraint on bonuses to help keep inflation down as he warned the
Bank of England governor Andrew Bailey said he recognised 'the hardship' increasing interest rates will cause, particularly for those on the lowest incomes. (PA)

The Bank also warned the country could slip into recession, forecasting a sharp contraction in gross domestic product (GDP) when energy bills go up at the end of the year.

It came after the British Retail Consortium (BRC) warned consumers on Wednesday that further price rises in food are on the horizon.

“Customers should brace themselves for further price rises,” said Helen Dickinson, the consortium's CEO.

“Global food prices have reached record highs. They will place further upward pressure on UK food prices in coming months.”

Read more: Scottish Power boss warns of huge winter energy bills

The Office for Budget Responsibility (OBR) in March said living standards are set to fall by the sharpest rate on record.

The Resolution Foundation has said that, without emergency financial assistance from the government, 1.3 million Britons are set to fall into absolute poverty in 2022/23.

On Monday, the Food Foundation revealed that 7.3 million adults in April lived in households that said they had gone without, or could not physically get, food.

Watch: Bank of England predicts cost-of-living 'hardship'