Yahoo Finance Interest rates: Falling inflation not sufficient to say the job is done, says BoE chief economist
Bank of England (BoE) chief economist Huw Pill said on Monday that there is "still work to do" on targeting inflation in the UK and that the Bank "shouldn't rush" to achieve its target of 2%, even in tough times.
Speaking at the Official Monetary and Financial Institutions Forum (OMFIF), he said that falling inflation is not sufficient to say the job is done. So far, falling inflation has reflected falling headline gas prices, which is a relatively mechanical effect of the market.
Now, the BoE is turning to factors such as wage inflation as a "persistent component" which are less likely to unwind of their own accord and may be a "much slower process".
The Bank's monetary policy committee will meet on 2 November to decide on interest rates. It left the rates unchanged at 5.25% in its last meeting on 21 September after 14 consecutive rises.
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The comments echo those of BoE governor Andrew Bailey, who warned that, despite signs of improvements being made on inflation, there was still work for the central bank to do in balancing policy.
The economic outlook still appears “very subdued," he said, while speaking at an event organised by the Institute of International Finance, during the International Monetary Fund/World Bank’s gathering in Marrakesh, Morocco.
“The last mile really does lean heavily on... restrictive policy,” Bailey added, saying that the slow growth rate of the country would continue to weigh on decisions made on Threadneedle Street.
Meanwhile in the US, Federal Reserve chair Jerome Powell has also said rates will remain "higher for longer," meaning that even after the central bank ends its current rate-hiking cycle and begins the process of bringing rates down, interest rates will remain higher than what the Fed thinks would be needed to sustain economic growth with inflation at 2%.
What, exactly, "longer" entails is at the heart of investor debates about the Fed's policy future. But last month, the central bank offered further outlines of its answer — at least three more years.
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