No quick fix to get UK inflation back to target – BoE’s Pill

Patience will be needed before British inflation returns to the Bank of England’s 2% target, creating an uncomfortable time to be a central banker, the BoE’s chief economist Huw Pill said on Friday.

“There’s no quick fix, and that lack of a quick fix means some patience will be required,” Pill told a conference in Bristol hosted by the Economics Observatory and the Festival of Economics.

Pill said he had not made up his mind whether he would vote for a rise in interest rates to 0.25% from 0.1% next month, which financial markets price in as a near-certainty after data earlier this week showed inflation had risen to a 10-year high of 4.2%.

BoE Governor Andrew Bailey and Pill have both said interest rates will need to rise to tame inflation, but markets were wrong-footed earlier this month when the BoE’s Monetary Policy Committee decided to wait for more labour market data before deciding on a move.

Pill said policy communication was getting more complicated due to two-sided risks to growth and inflation, in contrast to the heavy downside risks during the COVID-19 pandemic.

The BoE wanted to “train” markets to focus more on the medium-term outlook and two-sided risks, said Pill, a former Goldman Sachs (NYSE:GS) economist, but some volatility was unavoidable given uncertainty about the precise timing of rate rises.