Bank of England still has “work to do” to combat inflation, says chief economist Huw Pill
The Bank of England must not “declare victory prematurely” in the fight against inflation, a senior official has warned.
Huw Pill, the central bank’s chief economist, said there was still “some work to do” to curb rising prices.
The comments suggest the Bank is willing to raise interest rates once again if necessary, after pausing its hiking cycle last month.
The Bank raised rates 14 times in a row between December 2021 and August this year, taking them from 0.1 percent to 5.25 percent.
It then left interest rates unchanged in September in a move that raised hopes that borrowing costs may have peaked.
More walks? Bank of England chief economist Huw Pill said there was still “some work to do” to curb rising prices.
But while inflation has fallen from 11.1 percent in October last year to 6.7 percent, it remains well above the 2 percent target.
Official figures will show tomorrow whether inflation continued to fall in September and economists polled by Reuters expect a fall to 6.5 percent.
Speaking before that announcement, Pill said: “It is important that we do not declare victory prematurely, just because movements that are relatively mechanical in headline inflation are making their way.”
He added: “We still have work to do to get back to 2 percent.”
His comments echoed Gov. Andrew Bailey’s warning last week that “the last mile is going to be the hardest to get back on target.”
Bailey added: “We have made solid progress in terms of showing signs that inflation is being addressed, but let’s not get carried away because there is still a huge amount to do.”
Pill has previously compared the likely path of UK interest rates to Table Mountain, the flat-topped mountain overlooking the city of Cape Town in South Africa, with a sharp rise followed by a long flat top before a fall.
Referring to the uncertain outlook, he said yesterday that “the top of Table Mountain is very cloudy” before adding that rates would stay high “for as long as necessary, but not too long.”
U.S. Treasury Secretary Janet Yellen issued a similar warning about the outlook for rates in the world’s largest economy.
“Higher interest rates may persist, although that is not clear,” he said.
James Smith, economist at investment bank ING, said a surprise rise in inflation in the UK “could tempt the Bank into another rate hike in November”.
But he added: “This is not our base case, and having kept rates unchanged in September, we highly doubt that estimate will have changed by the time of the November meeting.”
“We now expect an extended pause until next summer, when rate cuts are likely to begin.”
