The current situation in the UK creates the potential for inflation to continue
Labor market indicators are beginning to change
The BOE is expected to raise rates to 4% in February
Bank of England (BOE) chief economist Huw Pill's latest statement hinted to investors that further rate hikes may be necessary.
In a statement on Monday, Huw Pill said the UK faces the risk of continued inflationary pressures from a tight labor market* even if natural gas prices stabilize or decline.
*There are many vacancies, but the available workers are limited.
Based on the current situation in Britain, higher natural gas prices and a tight labor market have created the potential for inflation to continue, Huw Pill said.
As a result, this will 'significantly' influence his monetary policy outlook in the coming months.
Pill said changes in labor market indicators are starting to change as job vacancies fall and unemployment is at its lowest level since 1974.
Britain is facing labor shortages due to an aging workforce since the pandemic and employers struggling to recruit workers due to post-Brexit changes in work visa rules.
The BOE raised its key interest rate to 3.5% in December, and financial markets expect it to raise the rate to 4% at a policy meeting in early February.
Following a series of rate hikes by the central bank, inflation eased slightly from the 41-year peak it hit in October at 11.1%.
