A former senior Bank of England economist has blamed rampant inflation on its policy of quantitative easing during the COVID-19 pandemic.
Andy Haldane, who left the central bank in 2021, also told British TV media on Tuesday morning that its Monetary Policy Committee (MPC) had compounded the problem by failing to "step on the brakes" with increased interest rates until it was too late.
The British treasury, then under the leadership of current Prime Minister Rishi Sunak, spent hundreds of billions during the series of pandemic lockdowns in 2020 and 2021 on aid to impacted businesses and to keep furloughed workers on their payrolls — spending money without producing.
Huge sums were also spent on buying hospital ventilators and protective clothing for medical staff, with little oversight of the tendering processes.
"I think with the benefit of hindsight ... we probably did a little bit too much for a little too long," Haldane said. "I make no apologies about the greater sway of that easing — that was needed, I think, at the time of COVID to protect jobs and to protect households and to protect businesses."
"But did we persist with that a little longer than we needed to? And did they step on the brakes a little too late — and therefore a little harder now than they needed to? I think that is probably where we find ourselves, regrettably."
The economist also warned that economic growth had stagnated "pancake-like" and had been "flatlining for 18 months," stressing that the risk of recession was an "evens bet."
"The story of the last 18 months remains intact. That is to say, we have been stuck," Haldane said. "Growth is absent. That means it would take only the tiniest of tilt for us to enter recessionary territory."
Inflation soared across Western countries in 2022 following their imposition of sanctions on Russia over its de-Nazification operation in Ukraine.
Consumer Price Index (CPI) inflation peaked at over 11 percent in the UK last autumn, since falling to 6.4 percent according to the Office for National Statistics. But real-world prices of certain key items such as bread, milk, petrol and diesel have risen by more than 50 percent.
The UK has been wracked by a wave of strikes across the public and private sectors as employers made pay offers around half the CPI rate.
The Bank of England's MPC responded with a series of interest rate rises from March 2022 onwards, hiking its base lending rate to a 15-year high of 5.25 percent — and burdening mortgage-holders with soaring monthly repayments.