BoE's Pill says a rate hike need not be start of long series

BANGKOK: A future interest rate increase by the Bank of England should not be interpreted by investors as the start of a long series of increases, BoE Chief Economist Huw Pill said on Thursday.

“We shouldn’t give the impression that because we act now, we are on another staircase … like we saw in 2022 and 2023.

It’s a different shock,“ Pill said during a panel discussion hosted by the Bangkok Economic Festival on the sidelines of International Monetary Fund meetings in the city.

On Wednesday, Pill – who has voted for higher rates since April – had pushed back against financial market bets for four rate rises over the next 12 months.

Unlike the US Federal Reserve and the European Central Bank, the BoE has kept rates on hold since the outbreak of the US-Iran war in February, but markets see a quarter-point increase after next week’s meeting as a near certainty.

Pill repeated his concerns that Britain was vulnerable to what he called “insidious” catch-up dynamics in inflation, as workers sought wage rises to compensate them for price rises.

“You probably need to have more of a prolonged period of restriction to squeeze that,” he said.

Higher bond yields in advanced economies probably reflected at least in part a rise in the real neutral rate of interest needed to stabilise inflation, another factor pointing to the need for higher rates, he added.