The Bank of England’s chief economist, Huw Pill, has urged for a more measured approach when it comes to cutting interest rates, warning that inflationary pressures remain a persistent concern for the UK economy. His comments come at a time when policymakers continue to assess whether the current pace of monetary easing might risk undermining the progress made in reducing inflation.
Speaking at an event hosted by the Institute of Chartered Accountants in England and Wales, Pill said that while inflation has started to ease, the situation remains uncertain, and the pace of future rate cuts should be slower than what has been seen over the past year. He stressed that a cautious stance was vital to avoid reversing the disinflationary gains achieved so far.
Pill noted that recent data suggests that inflation, although lower than last year’s peak, is still proving stubborn. He argued that acting too swiftly with further rate cuts could reignite inflationary pressures and delay the Bank’s goal of returning inflation to its 2% target.
“All this supports my view that the Monetary Policy Committee (MPC) should adopt a more careful pace in loosening policy,” he said. “It is crucial that we continue the steady path towards price stability rather than rushing to withdraw monetary restriction.”
Pill’s remarks echo his previous warnings about moving too quickly in lowering interest rates. He was one of the members of the MPC who voted against the most recent rate cut in August, which brought the Bank Rate down to 4%. He has consistently favoured holding rates steady amid ongoing inflation concerns.
In his earlier statements this year, Pill suggested that maintaining the current rate level was more of a “pause” rather than a “halt” in the Bank’s strategy. He explained that while inflation had shown signs of improvement, the risk of it remaining above target was still significant.
“As I said back in May, the decision to keep rates on hold was a skip rather than a stop,” he said. “But given how persistent inflationary pressures have proven to be, it’s becoming increasingly necessary to acknowledge their stubbornness.”
Looking ahead, Pill stated that he still expects the Bank of England to cut rates further if economic growth and inflation trends develop as forecast. However, he cautioned that policymakers must remain careful not to move too aggressively, as doing so could destabilise the progress made so far.
“I would anticipate more reductions in the Bank Rate over the next year, assuming the economy evolves in line with expectations,” Pill said. “Nevertheless, it remains crucial to avoid cutting rates either too far or too fast.”
The latest figures from the Office for National Statistics (ONS) showed that inflation, measured by the Consumer Prices Index (CPI), stood at 3.8% in August—the same level recorded in July. This consistency highlights that inflation is still running above the Bank’s 2% target, leaving little room for policymakers to ease too quickly.
Meanwhile, another member of the Monetary Policy Committee, Catherine Mann, issued a similar warning against early rate cuts. Speaking at an event organised by the Institute of International Finance in Washington, Mann cautioned that inflation could remain higher than anticipated for a longer period.
Mann emphasised that there was “clear upside evidence” that price pressures might not ease as quickly as some had hoped. She stressed that monetary policy must remain “relatively restrictive” to ensure that inflation expectations do not become unanchored, which could lead to renewed economic instability.
Despite recognising signs of modest growth and a softening labour market, Mann maintained that the balance of economic risks was still tilted towards inflation rather than recession. She explained that while the economy was cooling, the threat of persistent price increases outweighed concerns about slower growth.
“There is strong evidence that inflation is likely to remain above the target for some time,” Mann stated. “The risks are not balanced, and easing policy too soon could prove to be a mistake.”
In recent months, Mann has taken a more hawkish position on interest rates compared to some of her colleagues. While she supported the decision to keep rates steady in September, she opposed the previous cut in August, arguing that the timing was premature and that inflation still posed a significant risk to the UK’s economic stability.
Both Pill and Mann’s comments underline the cautious mood among Bank of England policymakers as they weigh the trade-offs between supporting economic growth and maintaining control over inflation. Their shared warnings suggest that while rate cuts may continue, the journey towards looser monetary policy will be gradual and closely monitored.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property