Bank of England's Huw Pill backs rapid interest rate rises

·Finance Reporter, Yahoo Finance UK
·2-min read
Flowers in bloom are sen opposite the Bank of England, in London, Britain August 1, 2018. REUTERS/Peter Nicholls
The Bank of England has hiked rates five times in row. Photo: Peter Nicholls/Reuters

Bank of England chief economist Huw Pill is prepared to vote on hiking interest rates at quicker pace if needed to tackle inflation.

The BoE has stuck to its series of gradual increases in borrowing costs, raising rates by a 25 basis points to 1.25%.

"The statement reflects both my willingness to adopt a faster pace of tightening than implemented thus far in this tightening cycle, while simultaneously emphasising the conditionality of any such change," Pill said in a speech at a central banking conference hosted by King's Business School.

UK interest rates
UK interest rates

Read more: Bank of England ready to act more forcefully on interest rates, says Bailey

Threadneedle Street now expects inflation to surpass 11% and markets are betting there is an 80% chance that it will raise rate by 50 basis points in August.

“Much remains to be resolved before we vote on our August policy decision. How I vote on that occasion will be determined by the data that we see and my interpretation of it,” he added.

Pill described soaring inflation as a “very unsatisfactory situation” that was hurting UK households, which are struggling with the cost of living.

“We recognise the hardship associated with elevated inflation rates. For those who spend a higher proportion of their income on energy and food – unfortunately, a group particularly numerous among the less well off – recent price rises have imposed a significant squeeze on their real incomes. These are difficult times for many people,” he said.

Inflation in the UK is at record high levels
Inflation in the UK is at record high levels

Deputy Governor Jon Cunliffe has also doubled down on the Bank of England's promise to tackle inflation, saying it will do "whatever is necessary".

He told BBC Radio 4: "We will act and we will act forcefully. We will use those tools to ensure that the economic conditions are not ones in which inflation becomes embedded."

Read more: Bank of England issues dire forecast for UK: expect more pain and misery

Last month the BoE's Monetary Policy Committee said it was ready to act forcefully if needed to tackle inflation that is likely to hit double digits later this year.

A 50 basis point hike next month would be the largest since the Bank gained independence in 1997.

Watch: How does inflation affect interest rates?

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