Huw Pill, chief economist at the Bank of England, said on the 3rd that raising interest rates now could reduce the likelihood of having to take more aggressive measures later to curb inflation accelerated by the Iran war. In a speech prepared for the Edinburgh Chamber of Commerce, Pill noted that "a rise in the policy rate does not need to be the start of a prolonged period of aggressive consecutive hikes," and that a prompt increase in the policy rate, if effectively implemented and communicated, could help prevent inflation from persistently overshooting its target through wage and price "catch-up" dynamics. He added, "For my own part, I have concluded that the policy rate needs to be raised to 4%." Pill also expressed the view that "fine-tuning" the policy rate amid uncertainty over energy prices is problematic. Three members of the Monetary Policy Committee (MPC), including Pill, voted for a rate hike at the July meeting, while the remaining six supported holding rates steady, preferring to wait for the impact of the Middle East conflict on longer-term inflation pressures.
Pill advocates rate hike to 4%, signaling tighter policy, likely raising UK yields.
