Interest rate reductions are unlikely to happen soon, even if inflation drops below 2 percent in the upcoming months, according to the Bank of England’s lead economist.
Huw Pill cautioned that policymakers should not be overly reassured if there’s a sharp decrease in inflation soon, which is currently at 4 percent.
He acknowledged the UK’s economy is not strong, but also mentioned that it’s not yet definitively clear whether inflation will rise again.
In a Cardiff University speech, he suggested that maintaining high interest rates, which are currently at a 16-year peak of 5.25 percent, might not be necessary.
Pill explained, “Just because we’re keeping a tight policy doesn’t mean the Bank Rate has to remain the same.”
These remarks follow a period where inflation reached a 41-year record of 11.1 percent in October 2022.
He also noted early indications of a decline in the enduring aspect of inflation trends, but emphasized that these signs are still preliminary.
