BANK of England Chief Economist Huw Pill said policymakers would sacrifice growth in order to bring down inflation in the UK, saying there’s a risk of prices developing a “self-sustaining momentum.”
Speaking at a web event on Tuesday, Pill said he further tightening of monetary policy will be needed in the months ahead, and the BOE was ready to act “more aggressively.”
The remarks are an admission that tighter monetary policy may deliver a recession as policymakers struggle to contain the impact of a surge in energy and goods prices. Pill said the BOE’s tools are “blunt instruments” that can bring inflation back to target but can’t solve other problems like a growing divide between the rich and the poor and a weaker pound.
He said policymakers needed to lean against the second-round effects of inflation and that they would allow growth to weaken if needed to hit their 2% target.
Pill’s comments follow a fifth interest rate increase from the BOE last week and an official forecast that inflation will accelerate to more than 11% this year. The bank opted for a quarter-point rise in the base rate to 1.25% but warned they could move more forcefully at future decisions if required — a hint the next hike could be a half-point basis points.
Speaking on Bloomberg TV last week, Pill said the trigger for bigger moves would signs of inflation becoming embedded in wages, and sustained expectations that prices will keep rising. — Bloomberg