BoE's Pill says a rate hike need not be start of long series

Business Recorder reported that a future Bank of England rate increase should not be seen by investors as the opening of an extended run of hikes, according to Chief Economist Huw Pill, who spoke on Thursday. The remarks came during a panel at the Bangkok Economic Festival, held alongside the IMF gathering in that city, where Pill said the bank faces a different kind of shock from the one seen in 2022 and 2023. Pill, a policymaker who has backed higher borrowing costs since April, had earlier resisted market wagers on four increases within the coming year.

Pill also restated his worry that Britain is exposed to what he termed insidious catch-up effects in inflation, as employees push for pay rises to recover lost purchasing power. He argued that a longer spell of restrictive policy will probably be needed to contain this, and that higher bond yields across advanced economies partly reflect a rise in the real neutral rate needed to keep inflation stable.

Unlike the US Federal Reserve and the European Central Bank, the BoE has kept rates unchanged since the US-Iran war broke out in February. According to the report, money markets describe a 0.25 percentage point rise at next week's meeting as close to a foregone conclusion.