Pill Warns of 'Insidious' Inflation Pressures Building in Britain

Bank of England Chief Economist Huw Pill has expressed concerns about the potential build-up of inflation pressures in Britain's economy. Speaking on Friday, Pill pointed to the recent surge in energy prices triggered by the Iran war as a risk factor for long-term inflation.

Pill noted that it was fortunate that the jump in energy prices had not led to a 'substantial deanchoring' of public trust in the Bank's 2% inflation target. However, he warned that businesses and workers may seek to recoup inflation-driven losses through increased pricing or wages, which could lead to more insidious second-round effects.

Governor Andrew Bailey emphasized that the Bank was not edging towards a rate rise despite support for keeping rates on hold falling from 7-2 in June to 6-3. Financial market pricing suggests that a rate rise is possible later this year due to increased inflation pressures, rather than an attempt to control existing inflation.

Pill's views are notable given his opposition to the Bank's 6-3 decision to keep interest rates on hold. Deputy Governor Clare Lombardelli also reaffirmed her support for keeping rates on hold, stating that it was not a hard decision.