(Bloomberg) -- Bank of England Chief Economist Huw Pill said he expects UK inflation to start falling next year, assuming natural gas prices stabilize and then start to drop.

“We are expecting to see headline inflation tail off in the second half of next year in fact quite rapidly on account of those base effects,” Pill said at a web event on Wednesday. “There’s a lot of uncertainty around the outlook for gas price developments.”

He reiterated that the central bank has “more to do” on raising interest rates to control inflation, but that borrowing costs probably won’t rise as much as financial markets have priced in.

The remarks add detail to what Pill and BOE officials have been saying since they lifted their key rate to 3% earlier this month. Investors expect another half-point increase in December and more in 2023.

Pill said the BOE is concerned about tightness in the labor market, which risks fanning inflationary pressures.

“We are acting to sort of preempt the danger that inflation in a persistent way departs from target,” Pill said.

He said policy makers are watching for inflationary pressures in the jobs market.

“Very low levels of unemployment and the association with the mid-1970s is not entirely reassuring from an inflection point of view,” Pill said. “People in the 50 to 65 age group, relative to pre-Covid levels, are having a higher level of inactivity not being in a job and not looking for work.”

©2022 Bloomberg L.P.