Huw Pill: BoE must 'see the job through' against inflation

investmentweek.co.uk:

‘The key element is that we on the MPC need to see the job through and ensure a lasting and sustainable return of inflation to the 2% target,’ Pill said. Credit: Bank of England

Speaking at a research conference organised by the South African Reserve Bank today (31 August), Pill warned that inflation remained «too high» and said there was «no real room for complacency».

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«The key element is that we, on the Monetary Policy Committee, need to see the job through and ensure a lasting and sustainable return of inflation to the 2% target,» Pill said.

While he acknowledged the risk of pushing interest rates too high and «inflicting unnecessary damage on employment and growth», he emphasised there was still more work to be done.

«At present, the emphasis is still on ensuring that we are — in the words of the Monetary Policy Committee's last statement — sufficiently restrictive for sufficiently long to ensure that we have that lasting return to target,» he explained.

Core inflation is a particular worry to the BoE, remaining stagnant in July at 6.4%, even as headline inflation continued to decrease. Pill cautioned that core inflation remained «stubbornly high and, as yet, does not show an obvious downward trend».

The chief economist argued the central bank should look to keep rates high «for longer, but in a more steady, resolute way».

«There is a lot of policy in the pipeline to come through,» he added.

In slides not published by the central bank, Pill suggested he would favour holding rates at 5.25% for the next three years, rather than raising them higher and then cutting them next year as the market expects, the FT reported.

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