Bank of England Chief Economist Expresses Inflation Concerns

LONDON (Reuters) – Bank of England Chief Economist Huw Pill expressed concerns on Tuesday regarding stronger-than-expected inflation in Britain, suggesting that interest rates may need to remain higher than many investors anticipate.

Pill highlighted the challenges of returning inflation to the BoE’s 2% target, indicating that monetary policy may need to be more aggressive or consistent to achieve this within a reasonable timeframe.

Last week, Pill opposed the BoE’s decision to lower interest rates by a quarter-point. He cautioned investors against assuming that the BoE’s latest forecast, which predicts inflation reaching the target by early 2027, aligns with market expectations for future rate cuts.

He warned of potential risks linked to weak productivity growth, reflecting a more inflationary outlook, and noted echoes of previous inflation crises in rising wage demands stemming from price increases in recent years.

Pill expressed concern over a possible structural change in price and wage-setting behavior, reminiscent of inflationary models from the 1970s and 1980s. These comments were made at a conference organized by the London School of Economics.