Tory anger at Bank of England grows over being too slow to act on inflation

Bank of England governor Andrew Bailey came under renewed attack from senior Conservatives as he raised interest rates again on Thursday and as No 10 refused to say whether he was doing a good job.

A No 10 spokesman said after being pressed repeatedly that Andrew Bailey “continues to have the Prime Minister’s support”, but did not say Rishi Sunak thought he was doing well.

It came as several Tories blamed Mr Bailey for failing to act quickly enough to rein in inflation and therefore needing to raise interest rates further to 5 per cent, putting mortgage holders under even greater pressure.

One MP told i Mr Bailey had “presided over incompetent management” of the economy and was “a year behind the curve with interest rates”, arguing faster action could have given people time to plan for increased mortgage costs.

Mr Bailey meanwhile “looks completely deflated all the time” should be replaced with an experienced figure like former governor Mervyn King – “a nice safe pair of hands” who “can be trusted” to restore confidence to markets, the MP said.

Other Tories backed the assessment that the Bank had failed to act quickly enough.

“If the Bank of England had acted sooner they wouldn’t have to go as far as this,” a former minister said.

“The Bank should have seen what was happening.”

Some also blamed the Bank for keeping quantitative easing (QE), which saw the Bank pumping money into the economy through bonds in the last decade or so, for too long and therefore adding inflationary pressure

Former prime minister Liz Truss, who criticised the Bank during her disastrous stint in No 10, is understood to have told friends that monetary policy has failed, the Bank’s QE programme expanded too quickly, and that interest rates should have been raised earlier.

Another senior Tory said the Bank should have waited for earlier interest rate rises to have an effect before raising them again.

“There are a lot of question marks about the Bank of England, both in starting to raise rates and remove QE too late and now arguably pushing rates up at a time when the effect of earlier rises is yet to manifest,” the MP said.

It came after Mark Harper, the Transport Secretary, became the first minister to pour scorn on the Bank chief on Wednesday, saying that both Mr Sunak and the Government had anticipated the danger of higher-for-longer inflation before Mr Bailey.

Asked whether the Bank had been slow to raise rates, Mr Harper told Sky News: “Some people make that criticism, yes, and there was a decision to make at the beginning about whether inflation was transitory or not.

“Rishi Sunak made it clear when he was Chancellor that he saw inflation as a problem and he saw that early on.”

It follows comments by Mr Bailey in 2021 that inflation would be “transient” as the global economy recovered from the pandemic slowdown.

Downing Street said the Government would “work closely” with the Bank “on the shared priority to reduce inflation”, but refused to be drawn into questions over Mr Bailey’s performance.