Huw Pill, Chief Economist at the Bank of England and one of four members who opposed this week’s rate cut, has cautioned that persistent inflationary pressures could temper the pace of future reductions in interest rates.
Speaking during an online presentation to businesses, Pill acknowledged that while there may still be room for rates to move lower, the pace of future cuts is far from certain:
“There’s still a little bit further downward to go with Bank Rate. I think the pace at which those downward moves perhaps go forward is a little bit less clear than the pace that we’ve seen over the last year.”
On Thursday, the Bank’s Monetary Policy Committee (MPC) narrowly voted 5–4 to cut the base rate by 0.25 percentage points to 4% — its lowest level in over two years. Pill was among the dissenters, preferring to keep rates steady amid concerns over rising inflation.
Official data showed inflation climbed to 3.6% in June, well above the Bank’s 2% target. The Bank also warned that rising food prices could push inflation to 4% by September.
Pill highlighted a shift in inflation risks:
“There is a risk of spillover into more persistent inflation. When inflation is high due to external forces, we need to be aware of the risk they might affect domestic price-setting.”
He reiterated the Bank’s commitment to its mandate:
“Our mandate is that we will get inflation to 2%, that’s the target, on a sustainable rate. We will do whatever we need with the Bank Rate to do that. They may be a bit lower than where we are — but nothing is set.”
His comments suggest the path ahead for monetary policy could be slower and more cautious, particularly if inflationary pressures prove more stubborn than expected.
