Central Bank wants more evidence of fading price pressure: BoE Chief Economist

Price Influence: The Bank of England's Chief Economist, Huw Pill, said that so far he had seen only "quite modest and tentative evidence" that inflation would fall back to and stay at the central bank's 2 per cent target, due to strong underlying domestic price pressures.

"I do think that we will have to wait several more months before we can be convinced that the squeezing out of the persistent component of inflation is there," Pill said at a panel discussion hosted by the United States' National Association for Business Economics.

BoE's policy committee

Pill was among the majority of members of the BoE's Monetary Policy Committee who voted this month to keep interest rates at a near 16-year high of 5.25 per cent.

Last week, Pill said the debate around cutting rates looked more like a question of "when" rather than "if".

Pill said Britain faced a "less benign" outlook than the United States, as wage growth and domestic services price inflation remained far above pre-pandemic levels despite a weak economy.

"Based on the data that I've described, I think getting to the point where we're able to make that move (lower) in Bank Rate is still some way off," he said. 

Figures this week showing Britain's economy had slipped into a mild recession in the second half of last year, while wage growth remained high, reinforced his concerns about bottlenecks in the labour market, he added. 

The BoE forecasts inflation will fall from 4 per cent last month to its 2 per cent target in the second quarter of this year, but then will rise towards 3 per cent at the end of 2024 as the disinflationary impact of lower natural gas prices fades.

(with Reuters inputs)