BoE Chief Economist Huw Pill signaled a softer tone on inflation risks, saying in a speech he is “more comfortable now” than six to twelve months ago. While he had previously stressed the balance of risks lay more on the inflationary side, he acknowledged that as time has passed and markets have repriced, the risks are shifting.
Pill has been among the more hawkish members of the MPC, opposing last week’s decision to slow the pace of quantitative tightening. The Bank will now reduce its gilt holdings by GBP 70bn over the coming year, down from GBP100bn last year, a move Pill resisted.
He explained his preference for “continuity and consistency” in QT, arguing that the framework works best when Bank Rate is the active tool for policy adjustments. With rates far from the lower bound, the MPC has flexibility to use Bank Rate to achieve its inflation target while QT runs in the background.
