Published by Jessica Weisman-Pitts
Posted on April 4, 2023
3 min readLast updated: February 1, 2026
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By David Milliken
LONDON (Reuters) -Britain’s central bank still cannot be sure that it has raised interest rates enough to tame inflation, although significant past tightening should soon bear down on the economy, Bank of England Chief Economist Huw Pill said on Tuesday.
“On balance the onus remains on ensuring enough monetary tightening is delivered to ‘see the job through’ and sustainably return inflation to target,” Pill said in remarks published by the BoE, ahead of a speech he was due to deliver in Geneva.
Pill voted with the majority on the BoE’s Monetary Policy Committee last month to raise the BoE’s main interest rate to 4.25% from 4%, its 11th rate rise since starting to increase rates in December 2021.
Pill previously talked in February about how it was “critical” for the BoE to see through its task of raising interest rates to control inflation.
His rate view contrasts with that of colleague Silvana Tenreyro, who said at a separate event on Tuesday that the rapid pace of tightening meant the BoE might have to cut rates “earlier and faster”.
Pill said he could not offer guidance on how he would vote at the BoE’s next rate decision on May 11. Financial markets see a 70% chance of another quarter-point rate increase then.
“Although headline inflation is set to fall significantly in the course of this year owing to a combination of base effects and falls in energy prices, caution is still needed in assessing inflation prospects on account of the potential persistence of domestically generated inflation,” he said.
British consumer price inflation peaked at 11.1% in October, a 41-year high, and was still above 10% in February. The BoE forecasts it will fall sharply during the current quarter and that it will be below 4% by the end of this year.
Both Pill and Tenreyro said the prospects for a sharp fall in inflation looked stronger than they did a few months ago, thanks to a slowdown in some of the most recent measures of private-sector wage growth and lower oil and gas prices.
“Relative to where we were … the difficult ‘trade-off’ facing monetary policy as a result of the adverse terms of trade shock – that is to say, rising inflation in concert with a squeeze on domestic real incomes and spending – has eased,” Pill said.
However, there was a risk that the improvement in domestic demand and employment prospects was not matched by the economy’s supply capacity, creating ongoing inflation risks, he added.
“The MPC will need to exercise its judgement about which of these two underlying stories is more relevant,” Pill said.
(Reporting by David MillikenEditing by William Schomberg)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation, and avoid deflation, to keep the economy running smoothly.
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the amount borrowed or saved. They are influenced by monetary policy and can affect economic activity.
The Bank of England is the central bank of the United Kingdom, responsible for issuing currency, managing monetary policy, and ensuring financial stability within the economy.
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