Pill Sees Higher Rates as Tame-Inflation Tool Amid Iran War Pressures

Bank of England Chief Economist Huw Pill believes raising interest rates now could help reduce the chance that the central bank needs to be more aggressive in future to tame inflation. He made these comments ahead of a speech he was due to deliver to the Edinburgh Chamber of Commerce on Thursday.

Pill and two other Monetary Policy Committee members voted to raise interest rates in July, but they were outvoted by colleagues who preferred no change as they awaited clearer signs of what the Iran war means for long-term inflation pressures. Investors in interest rate futures priced the chance of a quarter-point rate hike at the MPC's next meeting this month at little more than 15%, although that probability rose to more than 70% for the subsequent meeting in November.

Pill argued that raising interest rates now could help head off some of the potential inflationary pressures, which he described as 'catch up' nominal dynamics. He emphasized that an increase in Bank Rate implemented and communicated effectively need not be the start of a prolonged series of increases.