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BoE’s Pill says more rate hikes to come if inflation persists

© Reuters. FILE PHOTO: Buses travel past the Bank of England (BoE) building after the BoE became the first major world’s central bank to raise rates since the coronavirus disease (COVID-19) pandemic, London, Britain, December 16, 2021. REUTERS/Toby Melville

LONDON (Reuters) -Bank of England Chief Economist Huw Pill said the central bank would need to raise interest rates further if inflation persists, a day after the BoE increased borrowing costs for the first time since the start of the COVID-19 pandemic.

Asked on CNBC television whether there would be “a lot more rate hikes to come”, if inflation remained at its current level, Pill replied: “Well I think that’s true.”

“Yesterday was the Bank’s response to a view that … underlying, more domestically generated inflation here in the UK, probably centred around cost and wage pressures in a tight and tightening labour market, are going to prove more persistent through time,” he added.

The BoE voted 8-1 on Thursday to raise its main interest rate to 0.25% from 0.1%, and financial markets expect a further increase to 0.5% by March.

The central bank has revised up its inflation forecast to predict consumer price inflation will peak at a 30-year high of around 6% in April, when regulated household energy bills are due to rise.

Pill, echoing the BoE’s latest policy statement, said it was unclear whether the rapidly spreading Omicron variant of coronavirus would increase or dampen inflationary pressures.

“We need to move forward now cautiously, in the sense that we need to assess whether Omicron is going to lead to some reversal of the strength of the dynamics in the economy – and particularly in the labour market – that we have seen over the last six months-plus.”

“But I think it is also important to keep in mind that Omicron-related uncertainty is two-sided, at least as it is reflected in our core objective, our ambition in terms of the inflation outlook over the medium term,” he added.

BoE’s Pill sees more rate hikes if inflation persists

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