As the UK was cautioned to brace for difficult times, Boris Johnson indicated today that ministers may lift food tariffs to relieve the cost-of-living crisis.
The PM said he has discussed lowering trade barriers with other foreign leaders, with oranges and bananas among the produce that may be made more affordable.
The Bank of England issued a stern warning that the UK faced a harsher slowdown and greater inflation than other rich countries at the same time Mr. Johnson made his remarks while attending a NATO meeting in Madrid.
In a somber assessment, governor Andrew Bailey said the economy was suffering from a “very big national real income shock” and was at a “turning point” in its post-Covid recovery.
Additionally, he stated that the Bank was prepared to raise interest rates more quickly as it fought to bring inflation under control.
Prices have risen by 9.1% over the past year, the largest increase in 40 years, despite the Bank’s mandate to limit inflation at 2%. By year’s end, the headline CPI rate is predicted to reach 11%.
In response to a question about whether the cost of living crisis will grow worse before it gets better, Mr. Johnson said, “I wouldn’t want to phrase it precisely that way.” But what I would say is that it will be a problem for a while.
‘Very curiously, there’s a new push to reduce food tariffs at the G7,’ he continued. The value of food tariffs worldwide is $750 billion.
“Biden will now reduce $178 billion worth.” That would be beneficial, and would also apply to pet food, by the way.
“We have food tariffs that are unnecessary… Do orange tariffs need to be in place in the UK?
“I don’t believe we cultivate many bananas in the UK.”
The spokesman for the prime minister said: “That is something that we are looking into.
It doesn’t make sense at the time of the global cost of living crisis to apply tariffs on when there is no sort of UK competition on the other side.”
According to the Bank’s predictions, inflation will reach 11% by the end of the year as a result of the energy price cap increasing once more and rising prices for other products like food and fuel.
Concerns have been raised about the Bank’s management of the economy under Mr. Bailey in light of the spike in living expenses, which poses a risk of sending the country into recession.
Yesterday, he said: “I think the economy is definitely slowing somewhat earlier and bit more than others.” He was speaking in Portugal with prominent central bankers at the time.
He continued, “We are currently experiencing a very significant national real income shock that is coming from outside.”
The magnitude of the shock is enormous. due to the fact that it will decrease domestic demand, have an impact on the labor market, and cause inflation.
I can clearly see that the UK economy is beginning to slow when I look at it right now.
In that regard, we are sort of at a turning moment.
Mr. Bailey again cautioned that an additional increase in the energy price cap in October—following the increase in April—would cause inflation to increase even more.
The Bank has come under fire for not moving quickly enough to control inflation.
Since December, it has increased rates five times, from 0.1% to 1.250%, although never by more than 0.25 percentage points at once.
In comparison, since March, the US Federal Reserve has increased interest rates three times, by 0.25, 0.5, and 0.75 percentage points.
Inferring that a raise of 0.5 percentage points may be in the works as soon as the next meeting of the rate-setting monetary policy committee in early August, Mr. Bailey said the Bank has “the flexibility” to act more firmly.