© Reuters. FILE PHOTO: Chief Economist and Executive Director for Monetary Analysis and Research at the Bank of England, Huw Pill speaks to reporters in the Reuters’ offices at Canary Wharf in London, Britain, September 5, 2023. REUTERS/Suzanne Plunkett/File Photo
By David Milliken
LONDON (Reuters) -The right time for the Bank of England to cut interest rates is probably still some time away, due to uncertainty about the persistence of longer-term inflationary pressures the central bank’s Chief Economist Huw Pill said on Friday.
“Crucially, for me at least, we don’t have sufficient evidence yet. So that moment at which Bank Rate cuts might be possible is still some way off,” Pill told businesses in an online briefing hosted by the central bank.
He said the central bank should look through any temporary return of inflation to its 2% target in the months to come that was driven by external factors, and focus on keeping policy tight enough to squeeze out domestic inflationary pressures.
The BoE kept interest rates at 5.25% on Thursday, with Pill among the 6-3 majority for the decision. Two BoE policymakers voted for a quarter-point rate rise, while one policymaker voted for a cut in rates to 5%.
The central bank forecast inflation would fall from 4% in December to its 2% target in the second quarter of 2024, due to lower energy prices, but then rise back towards 3% by the end of the year as the effect of lower energy prices faded.
Pill said that although he expected BoE policy would need to stay restrictive for some time to reduce the pressures on inflation from rapid rises in wages and services prices, that did not mean rates had to stay unchanged.
“That need for restriction doesn’t mean the Bank Rate has to stay at its current levels indefinitely,” he said.