Speaking at the International Centre for Monetary and Banking Studies, chief economist Huw Pill spoke of the need to “see the job through” when it comes to inflation, arguing that “on balance the onus remains on ensuring enough monetary tightening is delivered”.
Bank of England hikes interest rates by 25bps
He added the bank was utilising a “more ‘data dependent’ stance” but there remained “a lot of policy-in-the-pipeline still to come through” and urged caution on any assessment of inflation.
On the reverse, MPC member Silvana Tenreyro suggested at the Scottish Economic Society annual conference, that the current level of the bank rate would require an “earlier and faster reversal” than has been posited in order to “avoid a significant inflation undershoot”.
She has continued to vote to not change to the rate in recent committee meetings, arguing that with the rate’s move into “restrictive territory”, a “looser stance is needed to meet the inflation target in the medium term”.
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Tenreyro argued the effects of the “large and rapid tightening” of the bank rate will see demand dragged “well below its potential”, resulting in a looser labour market pulling inflation down, which, without “further counterbalancing cost-push shocks” would result in inflation falling “well below target”.
These arguments come following the Bank of England’s 25 basis points rates rise at the end of March, pushing interest rates to 4.25% despite the shaky outlook for the financial sector.
