Brexit has worsened the cost of living crisis

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Brexit has deepened the cost of living crisis by making Britain more vulnerable to economic shocks, said US economist Adam Posen.

Write in the FinancialTimes, The chairman of the Peterson Institute for International Economics said stagflation – where high inflation and slow economic growth occur at the same time – is on the cards for the UK, reflecting the “realities that Brexit has wrought”.

He said the Bank of England will have to raise interest rates over the next year more than it expected this month as the UK economy has been “returned to the 1970s”.

The Bank’s Monetary Policy Committee – of which Posen was once a member – is now forced to factor in greater “spillover” from international events into inflation expectations.

“This is due to a combination of the UK being a smaller economy in its own right, less buffered by its integration into the EU, and an erosion of confidence in UK governments to pursue disciplined economic policies. “, did he declare.

“As a result, any shock is likely to lead to higher and longer lasting inflation than before Brexit.”

The bank’s performance

Business Secretary Kwasi Kwarteng said it was clearly “a problem” that the Bank of England was failing to meet its inflation target.

With the government under intense pressure over the cost of living crisis, The Sunday Telegraph reported that some Cabinet Ministers were unhappy with the Bank’s performance and questioned its independence.

According to the Bank’s most recent forecasts, inflation should exceed 10% against a target of 2% set by the government.

In a series of broadcast interviews, Mr Kwarteng said he believed Governor Andrew Bailey was doing a ‘reasonable job’ in difficult circumstances, but the 2% target was part of the mandate of the Bank “and they have to keep it at 2”. percent”.

” Very difficult ”

Speaking later on the BBC’s Sunday morning show, Mr Kwarteng said it would be “very difficult” to bring inflation down to 2%, although he acknowledged other countries were suffering similar pressures.

“Most countries in the world have high single digit inflation, some even double digits, but they (the Bank) have done a very good job,” he said.

“It’s very easy in hindsight to say they could have done this or they could have done that. All I know is that Andrew Bailey is a very respected and capable central bank governor and is doing everything he can to fix this problem.

Related: Brexit: Financial ‘competitiveness’ could trigger race to the bottom and reduce costs to taxpayers

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