By David Milliken
LONDON (Reuters) -The Bank of England's new message that it may have to act "forcefully" on interest rates is not unconditional and depends on the persistence of inflation pressures, the central bank's chief economist said on Friday.
While the BoE raised interest rates by just a quarter point on Thursday - lagging more robust action from the U.S. Federal Reserve and other central banks this week - markets are putting a 56% chance on a half-point rise in August and expect almost 100 basis points of tightening by September.
Huw Pill, who has previously advocated a "steady-handed" approach to rate rises, told Bloomberg TV that Thursday's statement represented a compromise on the Monetary Policy Committee, three of whose members voted for a half-point rise.
"The statement that we put out collectively is one that I think had a certain level of flexibility because it had to encompass those different views," Pill said.
"But at the same time, I think what we were trying to emphasise is that that flexibility also applies to what the decisions are. I don't think it's all about August. We talked about the pace, timing and scale of future decisions."
"And crucially, I think the word 'forcefully' - which clearly is the word the market is focused on, you focused on, and has a meaning - it's also important to see that that was put in the context of 'if necessary we will act forcefully', and so there's a conditionality there," Pill said.
The BoE's next scheduled Monetary Policy Committee decision is due to be announced on Aug. 4.
The BoE said on Thursday it was ready to act "forcefully" if needed to stamp out dangers posed by inflation as it raised interest rates for the fifth time since December.
Analysts were split on whether the BoE was signalling bigger rate hikes ahead or that it would wait to see how much a slowing of the economy would ease inflation pressures.
Pill denied the BoE had fallen behind the curve on tackling inflation which it expects to exceed 11% in October.
Raising rates aggressively would not stop short-term inflation pressures and would add to the risks of an undesirable slowdown in an economy that is already struggling, Pill said.
Instead, the BoE would look for things that might cause high inflation to persist - such as businesses raising prices to bolster profit margins, or headline wage growth staying high - when judging how far to raise rates, Pill said.
(Reporting by David MillikenWriting by William Schomberg)