BoE's chief economist casts doubt on four rate hikes forecast

Summarised from 2 outlets · 3 reports · Updated 14 Oct, 16:44 · Archive

The Bank of England's chief economist has expressed doubt about financial market forecasts for four interest rate increases over the next year.

The Bank of England's chief economist Huw Pill, who has voted for a rate hike at the Bank's last four meetings, has cast doubt on whether the central bank will follow financial market forecasts of four interest rate increases by the end of 2027.

Pill, the most hawkish member of the Bank's Monetary Policy Committee, said he was 'sceptical' of market expectations that would take Bank rate from its current 3.75 per cent to 4.75 per cent. Speaking at an International Monetary Fund meeting in Bangkok, he questioned the case for such a substantial tightening of monetary policy.

'Is it obvious that we will need to move, follow market pricing to four 25 basis-point hikes and so forth? So there, I would be a little more sceptical,' Pill said at an event organised by Citi. He added that the Bank did need to get into 'the right position' but suggested this did not necessarily mean following the market path.

City AM reports that Pill said a 'concrete manifestation' of inflation risks was needed to justify raising rates by a full percentage point in the next year. He highlighted that the Bank would need more evidence over the next six to nine months on what economists call 'second-round effects' – where price pressures from an initial shock become embedded in an economy through wage and price setting.

The Bank has left rates unchanged so far despite mounting inflation pressures, leaving it as the only major central bank not to raise rates this year. However, Pill is widely expected to get his way and secure a rate rise at the Bank's next meeting, with several other Monetary Policy Committee members indicating they are likely to vote for a rise.

Financial markets have consistently overestimated the number of rate hikes since the Middle East conflict began, according to City AM. So far during the conflict, central bank officials have left Bank Rate unchanged and remain on high alert for signs of second-round inflation effects, which have not yet materialised.

How it is being reported

• Banks of England chief economist ‘sceptical’ of markets’ interest rate expectationsThe Bank of England is unlikely to vote for the four interest-rate hikes forecast by financial markets, according to its chief economist, who added the central bank should have raised rates in the early stages of the Iran war. Huw Pill, who has the most hawkish track record on the Monetary Policy Committee, played down [...]City AM · 14 Oct, 16:31
• Hope for mortgage borrowers as Bank of England chief economist 'sceptical' on forecasts of four rate hikesThe Bank of England's leading interest rate hawk has played down fears that there will be a succession of hikes over the coming year.Daily Mail · 14 Oct, 12:19
• Hope for borrowers as BoE's most 'hawkish' member pushes back at market bets for rates to hit 4.75%The Bank of England's leading interest rate hawk has played down fears that there will be a succession of hikes over the coming year.This is Money · 14 Oct, 12:00

In this story: Huw Pill · Bank of England · Bangkok · International Monetary Fund · Middle East

This summary was written by AI from the headlines and standfirsts above, and states as fact only what at least two outlets report. How we use AI · Report a problem