The Bank of England is set to hike interest rates again and “cannot declare victory” yet against inflation, according to its top economist.
Huw Pill, chief economist at the Bank of England, told a conference that there is “more to do” on interest rates as the central bank seeks to stop inflation becoming embedded in the economy.
UK CPI inflation returned to a 40-year high of 10.1% in September on the back of rising food prices and is expected to have risen further in October.
Last week, the Bank of England hiked interest rates from 2.25% to 3%, in its biggest single rise for 33 years.
The Bank also warned that the UK could be on course for the longest recession since reliable records began in the 1920s.
On Tuesday, the chief economist highlighted that the UK is already entering a recession.
“I think we cannot declare victory against second-round effects, but we are entering a recession,” he told the UBS European conference in London.
“It’s a difficult trade-off environment for monetary policy.”
Nevertheless, Mr Pill stressed that the Bank’s Monetary Policy Committee (MPC), which decides any changes to interest rates, are not “inflation nutters”.
He added: “He have done some tightening but there is more to do.
“That doesn’t mean we’re going to move at a pre-defined pace until kingdom comes.
“At some point you have to think about what level of rate is appropriate.”
At the latest meeting, the Bank cautioned that it does not expect the base interest rate to rise as high as the markets had predicted.