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Bank of England ready to take ‘forceful’ action on inflation, says chief economist

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theguardian.com

The Bank of England will raise interest rates more aggressively to tackle soaring living costs if there are signs of inflation becoming persistently higher for longer than expected, its chief economist has warned.Huw Pill said Threadneedle Street was on high alert to take “forceful” action if there were signs of a wage-price spiral taking hold or if companies continued to raise their prices.The central bank raised interest rates by 0.25 percentage points on Thursday to 1.25%, while warning that inflation was expected to peak above 11% later this year as surging household energy bills and the rising cost of a weekly shop hit families across the UK.In comments signalling that the Bank is willing to go further with a 0.5-point rise in future, Pill told Bloomberg TV: “If we see greater evidence that the current high level of inflation is becoming embedded in pricing behaviour by firms, in wage setting behaviour by firms and workers, then that will be the trigger for this more aggressive action.”Pill insisted the central bank had not acted too late to curb the highest rates of inflation for four decades, despite raising its forecast for consumer price inflation for the fifth successive time on Thursday.The member of the Bank’s monetary policy committee (MPC) voted in the majority for a 0.25-point interest rate rise on Thursday, while three of his colleagues who are external membersof the MPC backed a larger half-point increase in a 6-3 split.The US Federal Reserve raised interest rates by 0.75 points on Wednesday, the biggest single increase since 1994, amid growing concerns over the strength of inflation in the world’s biggest economy.“We started earlier than some other central banks.

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