The top economist at the Bank of England has indicated that a decrease in interest rates is not likely to happen in the near future.
Speaking at Cardiff University Business School on Friday, Huw Pill stated that he wants stronger proof that the UK’s Consumer Price Index (CPI) inflation’s consistent element is decreasing sufficiently for inflation to reliably meet the 2% target.
Pill, who was one of the six members to opt for maintaining the interest rate at 5.25% during the last Monetary Policy Committee (MPC) meeting, remarked that the recent drop in the enduring portion of inflation is still quite new and “tentative.”
He noted: “In my opinion, there is still quite a bit of progress to be made before we can consider this evidence definitive.
“As long as this enduring element of inflation poses a risk to achieving the 2% inflation target steadily and sustainably, the MPC will have to keep a restrictive approach to its monetary policy to eliminate this persistent component from the economy.”
Pill acknowledged that monetary policy can remain tight even if the Bank Rate was reduced from its current level.
He continued: “However, according to my main prediction, the appropriate time to reduce the Bank Rate is still a while away.
“Before I support a decrease in the Bank Rate, I need to see stronger proof that the enduring element of the UK CPI inflation is diminishing to levels that align with the continued and sustainable achievement of the 2% inflation target.”