Speaking at a press conference today, BoE Chief Economist Huw Pill warned that returning inflation to the 2% target may prove more difficult than anticipated. Hence, Pill said the central bank may need to respond in a “somewhat more aggressive or more persistent” way to ensure inflation is brought under control within a reasonable time frame.
He raised concerns that recent shifts in wage and price-setting behavior might reflect a more “structural change”, drawing parallels with inflation dynamics of the 1970s and 1980s.
Pill emphasized that investors should not interpret BoE’s latest forecast, showing inflation returning to target by early 2027 based on market-implied rates, as a clear endorsement of future rate cuts.
Instead, he pointed to the Bank’s more inflationary risk scenario, which assumed persistently weak productivity and stronger wage pressures. These conditions, he said, echo past inflation crises, where elevated price levels triggered repeated and entrenched pay demands.
Last week, Pill voted against the BoE’s quarter-point rate cut, aligning with fellow hawk Catherine Mann in preferring to keep rates unchanged.
