Bank of England Chief Economist Signals ‘Significant’ Rate Rises
Bloomberg
Published Oct 12, 2022 20:40
(Bloomberg) -- Bank of England Chief Economist Huw Pill signaled interest rates are likely to rise sharply in November to fight inflation and respond to stimulus coming from the government’s tax and spending program.
Pill said the latest fiscal measures from Chancellor of the Exchequer Kwasi Kwarteng would probably boost the economy. He said it’s too early for the central bank to “declare victory” on holding expectations about future price increases to its 2% target.
The remarks are the latest to underscore the likelihood that borrowing costs will keep rising as the UK struggles to contain inflation, which is near its highest level in 40 years.
Pill, in a text of a speech, didn’t dwell on market turmoil touched off by the BOE’s determination to end emergency support for bond markets this Friday. Instead, he focused his remarks on the reasons policy makers see pointing to higher rates.
“Given the uncertain world and volatile markets we face, November can seem a long time away,” Pill said in the text of a speech released as he spoke in Glasgow on Tuesday. “At present, I am still inclined to believe that a significant monetary policy response will be required to the significant macro and market news of the past few weeks.”
On the government’s economic plan, Pill said, “these fiscal announcements will, on balance, provide a further stimulus to demand relative to supply over the medium-term” and that “this will add to the inflationary pressure.”
He said it’s crucial for the BOE to stick to its mandate on inflation to maintain the credibility of the UK’s economic framework, noting that the Treasury’s growth program set out in September was the trigger for the latest chaos in markets.
“The volatile market dynamics that followed the announcement of the Growth Plan underline the need to bolster the credibility of the wider institutional framework,” Pill said. “Whether reflecting pressures from the fiscal, financial or other domains, it is essential that the credibility, stability and integrity of the institutional framework governing UK macroeconomic policies are maintained.”
©2022 Bloomberg L.P.
Get The App
Written By: Bloomberg
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.