BoE economist: Interest rates may not fall as much as forecast as prices rise
The BoE's Monetary Policy Committee opted to cut base rate by 25 basis points to 4 per cent on Thursday, despite official forecasts suggesting inflation will rise to double the bank's target rate from next month.
Huw Pill, who was one of four MPC members to vote for a pause, said on Friday the outlook for further rate cuts has become less certain.
He told businesses in an online presentation: 'There's still a little bit further downward to go with bank rate.
'I think the pace at which those downward moves perhaps go forward is a little bit less clear than the pace that we've seen over the last year.'
Pill has often been more hawkish than MPC peers, voting to keep rates on hold at each of the last four meetings and warning in May the bank was cutting too fast.
The consumer price index rose to 3.6 per cent in June, while BoE forecasts suggest it will hit 4 per cent in September and not return to its 2 per cent target until the second quarter of 2027.
Resurgent inflation has been linked to higher labour costs as a result of last year's Autumn Budget, but increased global food prices and a round of April consumer bills hikes - most notably in water - have also contributed.
After Thursday's historic MPC meeting, markets are still pricing the potential for one more BoE cut of 25bps this year, bringing base to 3.75 per cent, but the move is not fully priced-in until the bank's February meeting.
Base rate is then expected to settle at 3.5 per cent in the middle of next year.
It comes after a flurry of disappointing data indicating weaker economic growth, an increasingly fragile jobs market and poor consumer confidence.
Pill on Friday said MPC members were mulling whether above-target inflation was starting to become entrenched in businesses' price-setting and how wages are negotiated.
He added: 'If that's more the driver of this increase in the upside risk to inflation, that might lead us to... have to question whether the pace at which we're reducing bank rate over the last year, a pace of one quarter-point cut every quarter, is that sustainable?,' Pill said.
'I think that's kind of where more of the dissenting members focus, the members of the committee who were voting ultimately to hold rates at 4.25 per cent yesterday.'
Pill stressed the Bank will continue to act to sustainably bring down inflation but added that there is 'no set path' for interest rates.
He said: 'Our mandate is that we will get inflation to 2 per cent, that's the target, on a sustainable rate. We will do whatever we need with the bank rate to do that
'They may be a bit lower than where we are but nothing is set.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
BBC News
5 minutes ago
- BBC News
Affordable homes pilot scheme starts in Wolverhampton
Wolverhampton has been selected to pilot a programme of 200 affordable homes being built in the of Wolverhampton Council will get access to a share of almost £20m in government funding to build at 11 sites over the next two will include one to four bedroom houses, flats and bungalows for affordable and social scheme will see council houses built on new sites and existing homes that have poor thermal efficiency and are of poor quality or non-traditional construction will be replaced. The city is the first local authority in the country to trial the scheme which sees Homes England, the government's housing and regeneration agency, working collaboratively with the council, the authority Islam, director of affordable housing grants at Homes England, said: "This new way of working is another example of how the agency works collaboratively with local authorities to achieve our mission to build much-needed new communities that people can be proud to call home."Steve Evans, deputy leader and cabinet member for city housing, said the "additional financial certainty" enabled the council to speed up delivery of housing provision."One of our key priorities is to build new and better homes for local people in well-connected neighbourhoods across the city," he said."This pilot will deliver new homes that will mean residents and the wider community benefit from improved health outcomes, lifestyle and sustainability." Follow BBC Wolverhampton & Black Country on BBC Sounds, Facebook, X and Instagram.
The Independent
7 minutes ago
- The Independent
Asian shares charge higher after US stocks rally to records on hopes for interest rate cuts
Shares advanced Wednesday in Asia after the U.S. stock market rallied to records when data showed inflation across the United States improved slightly last month. Tokyo's benchmark Nikkei 225 added to its record set a day earlier. Shares in Hong Kong, Singapore and Malaysia also gained more than 1%. The recent rally in share prices has been driven partly by relief over an extended truce in President Donald Trump's trade war with China, and partly by persisting hopes the Federal Reserve will cut interest rates. Those were reinforced by a moderation in the consumer price index in July. 'Asia woke up in full risk-on mode, riding the coattails of a U.S. session that looked like someone hit the 'infinite bid' button after CPI didn't blow the inflation doors off,' Stephen Innes of SPI Asset Management said in a commentary. China and the U.S. agreed to extend by 90 days the pause in drastically higher tariff rates to allow more time for talks on a broad trade agreement. Although uncertainty over what the negotiations will yield remains, the truce has relieved pressure on companies and countries across Asia that rely heavily in supply chains routed through China. Hong Kong's Hang Seng surged 1.9% to 25,439.91, while the Shanghai Composite index added 0.6% to 3,686.34. In Japan, relief over the Trump administration's confirmation that its exports will face a flat 15% U.S. import duty has driven strong buying of computer chip-related companies and other exporters. The Nikkei 225 gained 1.6% to 43,407.46. Elsewhere in Asia, South Korea's Kospi advanced 0.8% to 3,215.43. In Australia, the S&P/ASX 200 shed 0.5% to 8,840.30. Taiwan's Taiex was up 0.8% and the Sensex in India gained 0.4%. In Bangkok, the SET climbed 0.9%. On Tuesday, the S&P 500 rose 1.1% to top its all-time high set two weeks ago. It closed at 6,445.76. The Dow Jones Industrial Average climbed 1.1% to 44,458.61, while the Nasdaq composite jumped 1.4% to set its own record of 21,681.90. Intel's stock rose 5.6% after Trump said its CEO has an 'amazing story,' less than a week after he had demanded Lip-Bu Tan's resignation. Circle Internet Group, the company behind the popular USDC cryptocurrency that tracks the U.S. dollar, climbed 1.3% despite reporting a larger loss for the latest quarter than analysts expected. It said its total revenue and reserve income grew 53% in its first quarter as a publicly traded company, which topped forecasts. The better-than-expected report on inflation raised hopes the Federal Reserve will have the leeway to cut interest rates at its next meeting in September. Tuesday's report said U.S. consumers paid prices for groceries, gasoline and other costs of living that were overall 2.7% higher in July than a year earlier. That's the same inflation rate as June's, and it was below the 2.8% that economists expected. Lower rates would give a boost to investment prices and to the economy by making it cheaper for U.S. households and businesses to borrow to buy houses, cars or equipment. President Donald Trump has angrily been calling for cuts to help the economy, often insulting the Fed's chair personally while doing so. The Fed has hesitated, worried that Trump's tariffs could make inflation much worse. The Fed will get one more report on inflation and another on the U.S. job market, before its next meeting, which ends Sept. 17. The most recent jobs report was a stunner, coming in much weaker than economists expected. Critics say the broad U.S. stock market is looking expensive after its surge from a bottom in April. That's putting pressure on companies to deliver continued growth in profit. In other dealings early Wednesday, U.S. benchmark crude oil edged 4 cents higher to $63.21 per barrel. Brent crude, the international standard, was up 8 cents at $66.20 per barrel. The U.S. dollar rose to 147.94 Japanese yen from 147.84 yen. The euro climbed to $1.1686 from $1.1677. ___ AP Business writers Stan Choe and Matt Ott contributed.
.jpeg%3Ftrim%3D0%2C0%2C0%2C12%26width%3D1200%26height%3D800%26crop%3D1200%3A800&w=3840&q=100)
The Independent
7 minutes ago
- The Independent
How the HS2 shambles could have been avoided – if we'd copied the Swiss
'Eighteen years in, we still don't have a design for Euston,' laments Thomas Ableman. 'And then we wondered why the cost ballooned.' He is, of course, talking about HS2: the high-speed railway linking London Euston with Birmingham, Manchester and Leeds. Regrettably, you can forget about the last two cities; those crucial spurs were scrapped under the last government in an attempt to save money amid ballooning costs, while seeking votes from motorists. You can also forget for now about trains starting and ending at Euston in central London. With no design for the terminus station (and currently no cash to build it), when HS2 finally opens a decade or more from now, it will be a shuttle between a place called Old Oak Common in west London and Birmingham. Whether you are a passenger, a taxpayer or a resident of one of the locations being dug up for ever-diminishing national benefits, you have the right to be furious at a succession of politicians who have created the world's greatest example of how not to manage a vast infrastructure project. Within the transport world, everyone has an opinion on who is to blame. But Mr Ableman is different. He has had a distinguished career with Transport for London, Chiltern Railways and National Express, and created an intercity start-up named Sn-ap. He writes and podcasts about delivering better mobility. And his best blog this summer is called: ' This is how the Swiss would have done HS2 '. They wouldn't start with a grandiose project with 'a glossy brand or separate company', says Mr Ableman. 'No HS2 Ltd with its own culture and operating model and interface challenges. Just a series of connected but self-contained projects, each delivered by Network Rail as part of normal business. 'They pick a year in the future – 2045, say – and ask: what should the national train timetable look like then, if we want to meet our national objectives as a country? They work out what a good timetable looks like in that future. Then they build backwards from there. 'It sounds simple – even obvious – but it leads you to a very different way of working.' What is also crucial: a fund that guarantees a certain amount of spending on rail infrastructure every year, rather than a hand-to-mouth dependence on the Treasury and volatile politicians. Mr Ableman contemplates how the Swiss approach would have worked in the UK. Planners would have identified that key regional hubs – Birmingham New Street, Leeds, Manchester Piccadilly – are desperately short of decent rail connections from the suburbs because they don't have enough platform space. They would understand that the line between Coventry and Birmingham has a hopelessly inadequate timetable for the many prospective passengers who live along the route, because suburban trains must share the pair of tracks with intercity expresses. Across the whole country, to improve the service for millions: 'The fast tracks need to be used by slower trains, so the fastest trains need to run somewhere else.' The Swiss would take those problems and create a timetable that solves them. 'And then they'd ask: what infrastructure do we need to make this timetable possible?' Guess what: the solution to Britain's rail needs looks rather like HS2. 'However, because they know exactly what they can afford, every year, forever, they could immediately identify that it's too expensive. 'Because they know what they can afford, they can now value-engineer a version that fits. In the UK, no one really knows how much money the Treasury will be willing to release, or when. In Switzerland, there's a budget envelope. It's predictable. 'So having come up with an unaffordable infrastructure plan to deliver a perfect timetable, they'd go back, iterate the timetable, tweak the infrastructure plan and adjust things until it all fits. And then they'd start building.' Rather than a big bang, a rolling programme of cumulative upgrades would deliver key benefits early along the way to that timetable tuned for the needs of the nation. 'I can't promise every part will be delivered on-time and on-budget but it's much more likely,' he writes. 'And if something isn't late, it doesn't mean that the whole shebang is late – just that one project.' Mr Ableman's conclusion is chilling: that the Treasury's refusal to commit to long-term funding 'creates exactly the conditions that make infrastructure expensive'. Unintentionally, he says, the Treasury is 'the biggest driver of waste and inefficiency in UK infrastructure'. Politicians who really care about mobility – the economic and social benefits it unlocks – should accept that the problems of Britain's decrepit rail network are rooted in a timetable that works for almost nobody. Swiss railways work for everyone.
