BoE’s Pill stresses persistence in inflation fight

In a Financial Times interview, BoE Chief Economist Huw Pill emphasized the need for the MPC to avoid prematurely “declaring victory” in the fight against inflation, noting that CPI is still considerably above BoE’s 2% target, currently at 4.6%.

Pill acknowledged UK’s economic slowdown, noting “slower growth in activity and employment.” However, he assessed that the current inflation scenario is “more supply-driven rather than demand-driven.” Weakening in economic activity is not necessarily leading to a reduction in inflationary pressures, as might typically be expected.

Analyzing recent economic indicators, Pill observed more evidence of “sort of stubborn, high-level rates of inflation” and and growth that are “stronger” than being compatible with 2% inflation over the medium term.

He also argued that if the slowdown in economic activities and employment growth is linked to a decline in the economy’s supply performance, rather than a drop in demand, it wouldn’t create the necessary slack to ease domestically generated inflation.