BoE’s Pill: Cannot say now if rate rise would only be temporary

Bank of England (BoE) MPC member, Huw Pill, said that he does not expect second-round effects to be as strong as in 2022, and also that the second-round effects are behavioral, affected by what the BoE does next. He spoke at an event hosted by NatWest on Thursday.

Key quotes:

We must not allow ourselves to drift off into deep space of unmoored inflation dynamics.

I do not expect 2nd round effects to be as strong as in 2022.

Labour market weakness means second round effects likely to be weaker than in 2022.

Latest GDP data shows some robustness.

Not clear labour market is as loose as when there were oil price spikes in 2008 or 2011.

Tighter financial conditions do not get BoE out of question of whether to raise rates itself.

Prompt but modest increase in rates advantageous.

Second-round effects are behavioural, affected by what BoE does.

If you wait until market forces you to move, that would be more challenging to BoE.

Cannot say now if rate rise would only be temporary or a plateau for rates.

Fiscal and global situation are influencing long-term market rates as well as inflation outlook.”