Bank economist Pill sees ‘significant’ rates move
The Bank of England’s chief economist Huw Pill told a Glasgow audience today that he remains committed to a “significant” move in interest rates at the November meeting.
His comments came as markets remained in turmoil following a flurry of announcements and continuing doubts over the government’s finances.
“The past year has been difficult for all of us,” he told an audience at Strathclyde University. “Compared with twelve months ago: household utility bills are much higher than expected; the prospect of higher mortgage payments looms larger; and the outlook for economic activity looks weaker. None of this is good news.
“But, there is at least one constant in the face of all these challenges. The MPC remains fully committed to delivering on its mandate – to maintain price stability – by fulfilling its remit – to return inflation to the 2% target. Despite difficult circumstances, that commitment is unwavering. Monetary policy really is an anchor in these challenging times.”
His comments will prepare the markets for a likely 75 basis points increase in interest rates when the MPC meets on 3 November, just three days after the Chancellor unveils his medium-term fiscal plan and the assessment from the Office for Budget Responsibility on how he intends to finance it.
Speaking at the event organised by the Scottish Council for Development and Industry, Mr Pill added: “A couple of weeks ago I argued at a talk in London that the significant market reaction and economic implications of recent macro news – including recent fiscal policy news – was likely to prompt a significant monetary policy response at the MPC’s next meeting on 3 November.
“Of course, that rendezvous is still some time away. And, of course, much can happen in the intervening period, with markets exhibiting volatility and the geo-political and economic environment uncertain. Anyway I can only speak for myself today, not for the nine-member committee as a whole.
“But as things stand, I stand by my London statement. Given where we are, I continue to expect a significant monetary policy action at the MPC’s next scheduled meeting.”
On the government’s fiscal plans, he said.”On my reading, these fiscal announcements will, on balance, provide a further stimulus to demand relative to supply over the medium-term, monetary policy relevant horizon. This will add to the inflationary pressure coming from the Energy Price Guarantee.
“And, the volatile market dynamics that followed the announcement of the Growth Plan underline the need to bolster the credibility of the wider institutional framework.”