The Bank of England’s chief economist has warned that the UK’s vibrant labor market and rapidly rising inflation are pushing the central bank closer to raising rates at its next meeting. follow in December.
Huw Pill says the “burden of proof” is now in favor of increasing borrowing costs, although he says rate hikes will not be a quick fix that could bring down inflation in the short term. .
Pill, who joined the Bank in the fall from investment bank Goldman Sachs, added that there were still many uncertain trends in the economy and he was prepared to wait for the picture to clear before making a decision. determined.
Speaking at an economic conference in Bristol, Pill also hinted he could vote for a bigger-than-expected rise in financial markets, while saying he was open to other options. .
“That reflects real uncertainty at the individual level; that I would like to see how I would rate the situation,” he said, adding that the rate could go up by a bit more.
“While raising rates to a multiple of 0.25% would be convenient, there is no urgency to do so if another scale of tightening proves appropriate,” he added.
Pill said it was a “quite uncomfortable time” to enter the BoE in September, when inflation was already well above its 2% target and forecast to hit around 5% next year.
“There is no quick fix, and the lack of a quick fix means it will take some patience,” Pill told a conference organized by the Economic Observatory and Economic Festival.
Investors expect the BoE to raise interest rates from 0.1% to 0.25% at its next meeting on December 16. At its meeting earlier this month, the nine-member monetary policy committee Bankers disappointed the market by leaving rates unchanged, despite comments from the Bank’s Governor, Andrew Bailey, that they were ready to take “action” to calm inflation.
Since then, inflation has risen to a 10-year high of 4.2% with unemployment data showing the unemployment rate actually fell after the furlough scheme ended.
Pill is understood to be among a majority of BoE policymakers who fear most workers will be incentivized to demand inflation-fighting wage increases to compensate for higher prices, triggering a spiral salary price.
He said fears that the labor market would weaken and the unemployment rate rise were unfounded. “The burden of proof is probably a bit the other way around…so now I’m probably looking for reasons not to raise rates,” he said.
