BoE’s Pill: Rate reductions now a question of timing


BoE Chief Economist Huw Pill highlighted, in an online event overnight, a shift in BoE’s monetary policy discussions, which has evolved to determining “when” rather than “if” it will be appropriate to commence reductions in the Bank Rate.

Pill pointed out that rate reductions is currently “premature.” However, he suggested that the Bank does not require inflation to fully revert to its 2% target before easing monetary policy, given its current restrictive stance.

The Chief Economist also cautioned that due to developments in the Middle East, inflation is slightly more likely to “surprise on the upside than the downside” over the next year to 18 months. This perspective justifies to “to maintain restriction in the economy for some time”. This scenario would warrant maintaining “for longer” or even increasing the restrictive nature of monetary policy to combat “second round effects”.

Yet, Pill also left room for optimism, suggesting that if inflation dynamics dissipate more quickly than anticipated, there could be scope for more rapid interest rate reductions.

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