Bank of England still has ‘work to do’ to beat inflation, says chief economist Huw Pill
The Bank of England must not ‘declare victory prematurely’ in the fight against inflation, a top official has warned.
Huw Pill, the central bank’s chief economist, said there is still ‘some work to do’ to put a lid on rising prices.
The comments suggest the Bank stands ready to raise interest rates yet again if required having pressed pause on 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 per cent to 5.25 per cent.
It then left interest rates unchanged in September in a move that raised hopes borrowing costs have peaked.
More hikes? Bank of England chief economist Huw Pill said there is still ‘some work to do’ to put a lid on rising prices
But while inflation has fallen from 11.1pc in October last year to 6.7 per cent, it remains well above the 2 per cent target.
Official figures tomorrow will show if inflation fell any further in September with economists polled by Reuters expecting a drop to 6.5 per cent.
Speaking ahead of that announcement, Pill said: ‘It is important that we do not declare victory prematurely, just because movements which are relatively mechanical in headline inflation are working their way through.’
He added: ‘We still have some work to do, in order to get back to 2 per cent.’
His comments echoed last week’s warning from governor Andrew Bailey that ‘the last mile is going to be the hardest one to get us back to target’.
Bailey added: ‘We have made solid progress in terms of showing signs that inflation is being tackled, but let’s not get carried away because there’s an awful lot still 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.
In a reference to the uncertain outlook, he yesterday said the ‘top of Table Mountain is very cloudy’ before adding that rates would stay high for ‘as long as necessary but not too long’.
US Treasury Secretary Janet Yellen delivered a similar warning about the outlook for rates in the world’s biggest economy.
‘Higher interest rates may persist, although that’s not clear,’ she said.
James Smith, an 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 on hold in September, we doubt much will have shifted that calculation by the time of the November meeting.
‘We now expect a prolonged pause until next summer when rate cuts are likely to begin.’