Bank of England dismisses Tory claims public sector pay rises will stoke inflation

Andrew Bailey said the proposed pay increases would probably add less than 0.1 percentage points to headline inflation. Photograph: WPA/Getty Images

The governor of the Bank of England has dismissed concerns raised by the Conservatives that the new government’s plans for public sector pay rises would risk stoking inflation and keep interest rates higher for longer.

After the Bank cut the cost of borrowing for the first time since March 2020, senior Tories including Rishi Sunak and Jeremy Hunt said above-inflation salary increases for teachers, nurses and other public sector workers could delay further rate reductions.