Governor warns Bank will raise rates if inflation drives higher wages The Bank of England will raise interest rates if expectations of higher inflation drive up wages, says Governor Andrew Bailey. He said the Bank would act before the impact of inflation became widespread, stating: "Once you start to get an increase in inflation of this sort, we want to stop it becoming generalised in the economy." Bailey cited the risk of more bottlenecks, especially in demand for labour, which could fuel expectations of higher inflation, adding: "And that's why we would have to act on interest rates if we see that evidence becoming clear." His comments helped the pound - which came under pressure after last week's decision by the monetary policy committee - to claw back losses. It was trading up 0.43% against the dollar, at $1.355.