BoE chief economist warns UK inflation could hit 5% – reports

In his first interview as BoE chief economist, Pill said UK inflation is likely to rise “close to or even slightly above 5%”, but declined to state which way he would vote at the BoE Monetary Policy Committee’s meeting on 4 November.

“It is finely balanced,” he said, adding: “I think November is live”.

Despite a slowdown last month, inflation in the UK has been increasing rapidly overall throughout 2021 because of surging energy prices, supply chain disruption the effects of the pandemic and its recovery.

Government borrowing falls in September, but Chancellor in ‘tight spot’

Pill said inflation would likely come down in the second half next year.

“I would not be shocked – let’s put it that way – if we see an inflation print close to or above 5% [in the months ahead]. And that is a very uncomfortable place for a central bank with an inflation target of 2%,” he said.

Although consumer price inflation dropped to 3.1% in September, BoE has previously forecast that UK inflation could exceed 4% by the end of the year. BoE governor Andrew Bailey recently stated that the Bank may “have to act”.

In the interview, Pill said that the current settings of monetary policy are supportive and that the need for support has “diminished”.

Meanwhile, markets are now betting on a BoE interest rate rise in November, according to the FT.

Pill was cautious to suggest that rates would move much higher than the 0.75% level in place prior to the pandemic.

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