Yahoo Finance Interest rates: No more rises needed to tackle inflation, says BoE chief economist
Huw Pill suggests Bank of England is on track to hit 2% target within two years
Bank of England chief economist Huw Pill has suggested that holding interest rates at their current level will be enough to bring down inflation to the 2% target within two years.
"Having established monetary policy in restrictive territory, it's not the case that we need to raise rates in order to bear down on inflation. Sustaining rates at their current restrictive level will continue to bear down on inflation," Pill said in a presentation to the Institute of Chartered Accountants in England and Wales (ICAEW).
Read more: Bank of England holds interest rates at 15-year high
Although inflation has fallen from its peak of over 11% in October, it remains at 6.7%. "We do seem to have persistence there," Pill said.
“That's what, for me, makes it crucial that the restrictive stance of monetary policy, as reflected in Bank Rate being at 5.25%, that that restrictive response also has to be persistent, in order to squeeze the inflationary situation out of the system," he added.
The Bank of England forecasts that it won’t fall to the target until the end of 2025, largely because of a tight labour market.
Last week the BoE held its benchmark rate at a 15-year high of 5.25% and said it was not thinking about cutting it as it continued to focus on bringing down inflation.
Pill also said it was incorrect to view central bank comments on the outlook for monetary policy as a firm commitment, rather than plausible scenarios.
Read more: Interest rates: BoE's Bailey says it's 'too early' to talk about cuts
"There's no promise here and we are responsive to events. Events in the Middle East are a clear focus at the moment for reasons that I think are obvious," he said.
On Wednesday, governor Andrew Bailey said it is “too early to be talking about cutting rates” days after Pill said it was “not unreasonable” for investors to bet on a rate cut by next summer.
Watch: ‘Much too early’ to cut borrowing costs, Bank says after holding rates at 5.25%
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