BOE’s Pill Says U.K. Needs More Rate Hikes to Curb Inflation
Markets are currently almost fully pricing in an increase to 0.5% in February, and see rates hitting 1% later in 2022.
(Bloomberg) -- The Bank of England will likely to need to raise interest rates again to help keep a lid on inflationary pressures coming from the U.K. labor market, according to the central bank’s chief economist.
Huw Pill’s comments, made in an interview on CNBC, appear to endorse speculation from economists and investors that policy makers have started a series interest rate increases following a decision yesterday to raise the key lending rate to 0.25% from 0.1%.
Inflation in the U.K. is at the highest in a decade, and while Pill said he was “uncomfortable” with the current level, he indicated he was particularly worried about evidence of more persistent price gains linked to the the tight jobs market. When asked whether further rate hikes are coming, Pill said, “I think that’s true.”
“What we saw yesterday was the bank’s response to a view which has been building through time, accumulating evidence, that underlying more domestically generated inflation here in the U.K., probably centered around cost and wage pressures in a tight and tightening labor market are going to prove more persistent through time,” Pill added.
He said the BOE moved “in order to ensure the credibility of our objective” and bring inflation back to the 2% target.
“The pressures we still see building domestically within the labor market, in services, prices, inflation and so forth, need to be addressed by somewhat tighter policy and a somewhat higher bank rate,” Pill aid.
Markets are currently almost fully pricing in an increase to 0.5% in February, and see rates hitting 1% later in 2022. Economists at Goldman Sachs Group Inc said Friday they also see three hikes next year.
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