The head of the Bank of England (BoE) economist stated the high level of inflation in the UK at this point is expected to remain longer than expected. This further raises speculation that interest rates will rise faster.
In his first public statement since taking office the BoE chief economist said that rising inflation would force the BOE to raise interest rates in the near future. The latest data makes the BoE’s old view weaker which states the price increase is only temporary. Market prices are almost entirely in the 15 basis point increase rate at the end of the year.
“In my view, the current balance of risk shifts to major concerns about the inflation outlook, as the current inflation surge seems to be proving to be more durable than initially expected,” Pill wrote.
Pill, who was appointed last month, chose to keep interest rates unchanged at its September meeting. Policymakers at the time intended to raise the prospect of an interest rate hike as early as November to curb the inflation surge.
At the same time, Pill also noted that the UK economy has not yet returned to pre-pandemic levels. Thus monetary policy should be used optimally to support economic activity.
The GBP still maintained its strength against the US dollar with a strong 0.08% trading level at 1.3591.
