Pill Suggests Rate Hike Won't Spark Prolonged Cycle

Bank of England (BoE) Chief Economist Huw Pill says that raising interest rates will not necessarily lead to a prolonged and aggressive hiking cycle. In a speech at the Edinburgh Chamber of Commerce, Pill emphasized that a 'prompt' rate hike would be appropriate to address the risk of lingering price pressures due to the Iran energy shock.

Pill, one of the most hawkish members of the Monetary Policy Committee (MPC), previously backed an immediate rate increase in July. However, he signalled that he would only support modestly raising rates to curb inflation, which rose to 2.9% in July.

The markets expect the BoE panel to leave rates unchanged at 3.75% at their next meeting on September 17, but are fully pricing in a quarter-point hike by the end of the year.