BoE Chief Economist Huw Pill signaled growing concern over inflation risks stemming from the Middle East conflict, pointing to energy prices as the primary channel through which the shock will affect the UK economy. He described the current environment as one of “radical” uncertainty but stressed that commodity price movements will ultimately determine the policy outlook.
Pill highlighted the importance of monitoring second-round effects, particularly in wages and pricing behavior. These “catch-up” dynamics following large price shocks can create more persistent inflation pressures, posing a greater challenge for policymakers. Containing such effects is critical to maintaining price stability over the medium term.
Highlighting a more hawkish stance, Pill said he sees “upside risks to price stability mounting” and stands “ready to act” if needed. He stressed that “the fog of uncertainty in which we always operate cannot be an excuse for inaction”. The MPC, he said, must remain focused on delivering its inflation target, even in a volatile and uncertain global environment.
