Bank of England not committed to being ‘mighty’, says Pill

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By David Milliken

LONDON (Reuters) – The Bank of England’s new message that it may need to act “forcefully” on interest rates is not unconditional and hinges on whether inflationary pressures persist, the economist said on Friday. chief of the central bank.

With the BoE raising interest rates just a quarter point on Thursday – lagging stronger action from the US Federal Reserve and other central banks this week – markets are putting a chance 56% on a half-point rise in August and expect nearly 100 basis points of tightening by September.

Huw Pill, who has previously advocated a “tough” approach to rate hikes, told Bloomberg TV that Thursday’s statement represented a compromise within the Monetary Policy Committee, three of whose members voted for a half-year hike. -point.

“The statement that we collectively released is one that I think had some level of flexibility because it needed to encompass those different viewpoints,” Pill said.

“But at the same time, I think what we were trying to point out is that that flexibility also applies to what the decisions are. I don’t think it’s all about August. We’ve talked the pace, timing and scope of future decisions.

“And most importantly, I think the word ‘with force’ – which is clearly the word that the market is focusing on, that you’ve been focusing on, and that has meaning – it’s also important to see that this has been put in the context of ‘if necessary, we will act forcefully,’ and so there is conditionality,” Pill said.

The next scheduled decision of the BoE’s monetary policy committee is expected to be announced on August 4.

The BoE said on Thursday it was ready to act “forcefully” if necessary to stamp out the dangers posed by inflation as it raised interest rates for the fifth time since December.

Analysts were divided on whether the BoE was signaling bigger rate hikes ahead or whether it would wait to see how much a slowing economy would ease inflationary pressures.

Pill denied that the BoE has fallen behind in tackling inflation which it expects to top 11% in October.

An aggressive rate hike would not stop near-term inflationary pressures and would increase the risks of an unwanted slowdown in an already struggling economy, Pill said.

Instead, the BoE would look for things that could keep inflation high — like companies raising prices to bolster profit margins or overall wage growth that remains high — when judging how far to raise rates. , said Pill.

(Reporting by David MillikenWriting by William Schomberg)

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