BoE Chief Economist Huw Pill said today that the UK’s inflation remains far stickier than expected, reinforcing the case for a slower pace of monetary easing.
In a speech, Pill noted the “lack of progress” in reducing inflation as “disappointing”. He cautioned that the persistence of above-target inflation, combined with heightened sensitivity among firms and households to price developments, risks creating “self-sustaining inflation dynamics”. The prominence of food prices, which directly affect household perceptions of inflation, could further embed inflation expectations if not carefully managed.
This, he argued, calls for a “more cautious pace in withdrawing monetary policy restriction so as to ensure continuation in disinflation towards the 2% target.” While Pill reiterated that future rate cuts remain likely over the next year if the outlook evolves as expected, he stressed the importance “to guard against the risk of cutting rates either too far or too fast.”
