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Highlights
- PM Boris Johnson has warned that the country might be headed towards a 1970s-style "wage-price spiral".
- He has pledged to make housing more affordable but has also warned that the ongoing cost-of-living crisis might escalate if the wages keep surging along with prices.
Amid the rising inflationary pressures, UK PM Boris Johnson has warned that the UK economy might be headed towards a 1970s-style wage-price spiral if the incomes of households keep increasing in line with the rising inflation. This warning came as the PM talked about affordable housing and extended the Right to Buy scheme to the housing association tenants on 9 June.
The PM has also declared the Benefits to Bricks scheme for letting welfare payments secure mortgages.
The UK Government has been facing a lot of criticism lately for not doing enough to support the struggling households amid soaring inflation. In his speech, PM Boris Johnson pledged to make housing more affordable.
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But at the same time, he warned that the ongoing cost-of-living crisis might escalate if the wages keep surging along with prices. According to him, pay raises aren’t the solution to tackle the rapidly rising inflation.
If wages increase with prices, the result will be a wage-price spiral or an inflationary spiral. This may potentially push the country towards stagflation, just like in the 1970s. As per the Bank of England, inflation could reach 10% this year, and huge pay hikes could further worsen the inflationary situation.
Wages should technically go up only with better skills and higher productivity, and inflation should be controlled by tackling the underlying issues, not by circulating more money in the economy.
Amid soaring inflation and fears of a wage-price spiral, UK investors can keep an eye on dividend-paying stocks which can provide them with a stable passive income stream.
RELATED READ: Johnson set to table new plan for UK economy. FTSE stocks to explore
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Rio Tinto plc (LON: RIO)
The shares of the Anglo-Australian mining giant, Rio Tinto plc, were down by 1.68% at around 12:00 PM (GMT+1) on 10 June 2022 and were trading at GBX 5,805.00. On a year-to-date basis, the FTSE 100 company has given its shareholders a return of 18.66% as of 10 June 2022. The current market cap of the company stands at £73,708.11 million and it is offering an annual dividend yield of 10.7% as of 10 June 2022.
Diversified Energy Company plc (LON: DEC)
The shares of the independent oil and gas production business, Diversified Energy Company plc, were down by 0.40% at around 12:00 PM (GMT+1) on 10 June 2022 and were trading at GBX 123.20. On a year-to-date basis, the FTSE 250 company has given its shareholders a return of 17.96% as of 10 June 2022. The current market cap of the company stands at £1,052.13m and it is offering an annual dividend yield of 10.7% as of 10 June 2022.
RELATED READ: HTG, ENQ, ENOG: Stocks to explore amid fears of interest rate hikes
M&G plc (LON:MNG)
The shares of the global investment manager, M&G plc, were down by 1.54% at around 12:00 PM (GMT+1) on 10 June 2022 and were trading at GBX 210.50. On a year-to-date basis, the FTSE 100 company has given its shareholders a return of 5.61% as of 10 June 2022. The current market cap of the company stands at £5,485.33m and it is offering an annual dividend yield of 8.6% as of 10 June 2022.