Is Andrew Bailey right to blame retirees for threatening inflation?

Andrew Bailey says we don't make policy with benefit of hindsight

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An increase in Britons taking early retirement has driven interest rates and inflation, according to Governor of the Bank of England, Andrew Bailey. He warned that the sharp decline in the size of Britain’s workforce has forced further hikes. But is he right to blame retirees? Vote in our poll.

Mr Bailey said the growing retired population was “part of the reason why we have had to raise the Bank Rate by as much as we have”.

Interest rates rose for the 11th consecutive time to 4.25 percent this month, while the consumer price index inflation rate increased to 10.4 percent in the 12 months to February.

At the London School of Economics on Monday evening, he said: “The rise in economic inactivity is a change to the supply of labour, independent of demand, in particular by older workers.

“If those workers have accumulated enough savings to sustain a desired level of consumption much like the one they had before their early retirement, at least for a while, aggregate demand will not have fallen by as much as aggregate supply.”

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He continued: “We should expect this to put upward pressure on inflation in a way that would call for a higher level of interest rates to dampen demand.”

The workforce has shrunk by 0.4 percent compared to pre-pandemic levels which is equivalent to 132,000 people. Mr Bailey described the inactivity among 50 to 64-year-olds as “particularly striking”

He welcomed Chancellor Jeremy Hunt’s Spring Budget earlier this month which encouraged over-50s to stay in work longer. He said the measures introduced were “important”. He added: “I welcome them, I think they’re really addressing the right things. I’m pleased we’re having more of a national debate on the labour supply because it’s very important.”

So what do YOU think? Is Mr Bailey right to blame retirees for threatening inflation? Vote in our poll and leave your thoughts in the comment section below. 

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