Hugh Pill, chief economist at the Bank of England (BoE), has expressed a more cautious view on future interest rate cuts, with Governor Andrew Bailey saying policymakers could take a more aggressive approach. This seems to contradict recent suggestions.
Speaking at the annual general meeting of the Institute of Chartered Accountants in England and Wales, Mr Pill warned there was “good reason to be cautious” when assessing the risk of a rebound in inflation in the coming months.
Inflation fell to the central bank’s target of 2% in May and June, but has since risen to 2.2%. “If the economic and inflation outlook remains largely as expected, further bank rate cuts remain in sight, but it is important to be wary of the risk of cutting rates too much or too soon,” Pill added. Ta.
He stressed the need for a “gradual withdrawal of monetary policy restrictions” and highlighted the risks of premature interest rate cuts while the economic outlook remains uncertain.
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Pill, known for his hawkish stance, was one of four members of the BoE’s Monetary Policy Committee (MPC) who opposed the August interest rate cut, but the other five members voted in favor of it. Voted against.
Pill said the bank rate โneeds to fall over time, but is sufficiently constrained in the transition period until UK inflation reaches its target on a permanent and sustained basis, rather than a temporary or temporary periodโ. “It needs to decline at a pace that ensures it is sustained.”
He added that the MPC “needs to ensure that the UK’s CPI inflation rate is reliable and maintained at the target of 2% on a durable and sustained basis”.
“We remain concerned that structural changes could further sustain inflationary pressures,” Pill said.
In an interview with the Guardian newspaper a day earlier, Governor Bailey said the central bank could be “a bit more aggressive” in cutting interest rates, suggesting further bank rate cuts could be made this year.
The BoE governor said the central bank could be “more aggressive” in reducing borrowing costs if inflation remained under control.
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