Bank of England Chief Economist Huw Pill says the bank will probably need to raise rates further in 2027, beyond a move in December. He cites the risk of second-round effects from elevated energy costs. Pill also signalled he will not seek a third term.
Bank of England Chief Economist Huw Pill said the bank will probably need to raise interest rates further in 2027, on top of an increase at the next meeting in December, to combat inflation. He spoke in an interview with the Financial Times published on Saturday.
Pill sees more to do after the November hike
The central bank raised rates to 4% from 3.75% at its November meeting, its first rate hike since August 2023. Pill called that a significant step toward getting monetary policy into a better place, but said the bank has further to go.
Pill considered an end to the US-Israeli conflict with Iran and a fall in energy prices a very low probability, and the FT said this signals he is set to vote for another quarter-point increase next month.
Inflation forecast and market pricing
The BoE says British inflation, driven by second-round effects on wages caused by the Iran war, is likely to rise to around 5% in the middle of next year. That is more than double the central bank's target.
According to the FT interview: "We will do what is necessary to get inflation back to 2% through time." He also said he believed the bank should have acted sooner, and that the ability to be modest in the scale of rate rises has diminished because of the delays.
Markets currently price in 90 basis points of tightening by end 2027, implying rates could get close to 5% in 2027. Pill said these expectations were not outrageous.
Pill also signalled he would not seek a third term as chief economist when his current term ends in September 2027, according to the FT report.
Source: Reuters via Investing.com
Trading involves risk.
Risk Disclaimer
