The Bank of England needs to tighten policy further to fight rising inflation, but it’s also wary of acting too quickly and risking pushing the UK into recession, according to Chief Economist Huw Pill.
Pill, who has voted with the majority to hike rates at each of the BOE’s previous four meeting, told the Western Mail newspaper that he expects “over the coming months some further moves in the direction we have been seeing.”
“I personally think there is more that needs to be done in this transition from what has been a very supportive monetary policy for the economy really going back to the financial crisis, through the fallout from Brexit and the pandemic,” he said, according to the newspaper. “And we need to go not necessarily to a super restrictive stance, but to a stance that takes some of that support away and is more reflective of the fact inflation is higher and labor markets tighter.”
The BOE is grappling with an inflation rate that is at a four-decade high and predicted to go even high, and an economy that is forecast to slowdown as the cost of living crisis saps demand. That means there are risks if the bank acts too slowly, or too quickly, Pill said.
“When you think about that in terms of policy too much runs the risk that you fall into and get stuck in a deep recession, which is very costly and too little you run the run risk that inflation gets this self-sustaining momentum and runs away from the target,” he said.
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