LONDON (Reuters) – Bank of England (BoE) chief economist Huw Pill said the central bank will need to raise interest rates even further if inflation persists, the day after the BoE soared borrowing costs for the first time since the start of the Covid-19 pandemic.
Asked on the CNBC TV network if there would be “much more rate hikes to come” if inflation remained at the current level, Pill replied: “Well, I think that’s true”.
“Yesterday was the Bank’s response to the view that… underlying inflation, generated more internally here in the UK, likely centered on costs and wage pressures in a tight and tight labor market, will prove more persistent over time.” added.
The BoE voted eight-to-one on Thursday to raise its main interest rate from 0.1% to 0.25%, and financial markets expect a further increase to 0.5% in March.
“We need to proceed now with caution, in the sense that we need to assess whether Ômicron will lead to any reversal in the strength of the dynamics of the economy – and particularly of the labor market – that we have seen in the last six months or more.”
“But I think it’s also important to keep in mind that the uncertainty related to Ômicron is two-sided, at least insofar as it is reflected in our core objective, our ambition in terms of medium-term inflation prospects,” he added.
(By William Schomberg)
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