(Bloomberg) --
The energy shock hitting UK citizens' incomes is about five times as bad as the worst episode of the 1970s, according to a senior Bank of England official.
Deputy Governor Ben Broadbent shared that analysis of the cost-of-living crunch with reporters after policy makers delivered a half-point interest-rate hike, the biggest such move in more than a quarter of a century.
Here's how he came up with that comparison:
“Over the worst two-year period of the ‘70s, which I think was between the first quarters of 1974-76, the share of income going on household utility bills rose by, I think, 0.7 percentage point -- so it's absorbed that much of real-income growth over that period. Between the first quarters of 2021 and 2023, we think that number will be pretty much 3.5 percentage points. It's around five times as big. So that is the scale of just the energy-price shock, and on top of that you have what happened as a result of the pandemic last year, and other effects of the war, for example on wholesale traded food prices.”
Broadbent, sitting alongside Governor Andrew Bailey, insisted that this time will also be different because the policy response will ensure such shocks won't persist.
“We will make sure that they are not there in the inflation rate in two, three years time, and we'll do whatever is necessary to ensure that is the case. And that will be one big difference between this shock, much larger though it is, and what happened in historical episodes, in particular the 70s and 80s.”
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
