The Bank of England still has a lot of work to do to tackle inflation, says chief economist Huw Pill
The Bank of England must not “rush to declare victory” in the fight against inflation, a top official has warned.
Huw Pill, the central bank’s chief economist, said there was still “some work to be done” to curb the rise in prices.
The comments suggest the bank is prepared to raise interest rates again if necessary, after pausing its rate hike cycle last month.
The bank raised interest rates 14 times in a row between December 2021 and August this year – from 0.1 percent to 5.25 percent.
It then left interest rates unchanged in September, raising hopes that borrowing costs had peaked.
More hikes? Bank of England chief economist Huw Pill said there was still “some work to be done” to curb the rise in prices
But although inflation fell to 6.7 percent from 11.1 percent in October last year, it is still well above the 2 percent target.
Official figures will show tomorrow whether inflation fell further in September. Economists polled by Reuters expect a decline to 6.5 percent.
Ahead of the announcement, Pill said: “It is important that we do not prematurely declare victory just because moves that are relatively mechanical in headline inflation take hold.”
He added: “We still have some work to do to get back to 2 percent.”
His comments echoed Gov. Andrew Bailey’s warning last week that “the last mile will be the hardest to get us back there.”
Bailey added: “We have made solid progress on the signs that inflation is being tackled, but let’s not get too carried away because there is still a lot of work to do.”
Pill has previously compared the likely trajectory of UK interest rates to Table Mountain, the flat mountain above the city of Cape Town in South Africa, with a sharp rise followed by a long flat peak and a fall.
Referring to the uncertain outlook, he said yesterday that “the top of the table mountain is very cloudy” before adding that interest rates would remain high “as long as necessary, but not for too long”.
U.S. Treasury Secretary Janet Yellen issued a similar warning about the interest rate outlook in the world’s largest economy.
“Higher interest rates could persist, although that is unclear,” she said.
James Smith, an economist at investment bank ING, said a surprise rise in inflation in Britain “could tempt the bank to raise interest rates again in November.”
But he added: “This is not our base case and given we left rates unchanged in September, we doubt this calculation will have changed much by the November meeting.”
“We now expect a longer pause until next summer, when rate cuts are likely to begin.”