Bank of England’s Huw Pill Casts Doubt on December Rate Rise
(Bloomberg) -- Bank of England Chief Economist Huw Pill cast doubt on the certainty of an interest rate increase in December, noting the decision would be “finely balanced” and pointing out bumps in the economic recovery.
Speaking at an event in Bristol, Pill said there’s “no quick fix” to bring inflation back to the 2% target and that the central bank doesn’t have the tools to fix supply chains that were upended by Brexit and the pandemic.
The remarks echo Pill’s comments from the before the bank’s surprise decision to leave borrowing costs on hold in November. That may give reason to doubt a move next month, which investors have almost fully priced.
“I came to the bank, thinking the recovery is well established, there is momentum in the economy, inflationary pressures are building,” Pill told reporters after his meeting. “The burden of proof perhaps a little bit in is the other direction, so now I’m looking for reasons for it not to happen, rather than reasons to happen.”
Pill, who joined the Monetary Policy Committee in September, also rejected criticism about the way policy makers communicate their intentions. He said the BOE “can’t get caught up in minute-to-minute” commentary. “We can’t get caught up in media/market driven dynamics.”
Policy makers led by Governor Andrew Bailey have become increasingly vocal about the bank’s need to prevent an upward spiral in wages and prices. Inflation jumped to 4.2% in October, the highest in a decade and more than double the target.
Bank staff expect the reading to rise further still, but Pill along with his colleagues have been cagey about exactly when they will act. Uncertainties the BOE has mentioned include rising Covid cases, a surge in energy prices, trade friction with the European Union, a shortage of truck drivers and a lack of goods in markets.
“I don’t think about my decision about any one indicator,” Pill said. “I have comfort there’s momentum in the activity in the recovery” and the BOE is focused on communicating in a way that emphasizes the “underlying movements” in the economy.
“I genuinely do not know today how I will vote” on rates in December, Pill said. “There’s a genuine uncertainty even in my own mind about how I’ll vote” and risks to the economy are “two sided.”
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