Pill Warns Labor Market Slack Won't Kill Inflation Risk as BoE Faces Dilemma

The Bank of England's chief economist, Huw Pill, is warning that even though the UK labor market is loosening up and unemployment is climbing, inflation risks remain. According to Pill, the threat of second-round effects, where businesses and workers raise prices and wages to offset rising costs, is still very much alive.

The numbers behind the worry are clear: UK Consumer Price Index inflation sat at 2.8% in April 2026, above the Bank of England's 2% target, and forecasts suggest it could climb past 3% later this year. The primary culprit: energy costs, amplified by ongoing tensions in the Middle East that have added more than a full percentage point to inflation projections.

Pill is scheduled to deliver a keynote speech at the Edinburgh Chamber of Commerce in September 2026, where he's expected to reinforce his message about the dangers of letting inflation expectations drift too far from target. His argument boils down to this: previous policy tightening may not have been restrictive enough to fully extinguish inflationary pressures, and pausing too early could allow expectations to become unanchored.