Huw Pill hints at ‘significant’ hike in November
Huw Pill, chief economist at the Bank of England (BoE), said a “significant” response was needed to tackle inflation and fiscal stimulus, hinting at aggressive action by the monetary policy committee on next month.
Speaking at the Scottish Council for Development and Industry in Glasgow on Wednesday, Pill, who joined the MPC just over a year ago, also reiterated the Bank’s commitment to bringing inflation back to its 2% target.
“At this time, I am still inclined to believe that a meaningful monetary policy response will be needed to the important macroeconomic and market news of recent weeks. But I will see when we get to November how events have evolved between -time,” he said.
This comes as the UK central bank has already raised interest rates at each of its last seven meetings, with the bank rate currently at 2.25%.
It also ended quantitative easing (QE) and began to reduce its accumulated gilt holdings for monetary policy purposes.
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“We have moved away from the forecast that indicated the bank rate would remain floored at its effective lower bound that I encountered when I joined the MPC last year,” he said.
“In its place, the MPC has emphasized that its policy decisions are driven by changing data, while signaling a willingness to respond more forcefully to signs of greater inflation persistence, if that happens. was necessary.
“At all times, the MPC has remained committed to a medium-term view that stabilizes inflation around the 2% target.”
Pill also welcomed the recent independent forecast from the Office for Budget Responsibility (OBR) after the Chancellor avoided them in his mini-budget last month.
The Finance Minister’s £45 billion in unfunded tax cuts sent markets into turmoil and the pound fell to its lowest level against the dollar.
However, the OBR forecast will now be released alongside Kwasi Kwarteng’s budget plans on October 31.
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“It is welcome that the role played by the Office for Budget Responsibility in reviewing the government’s budget plans is reflected in the upcoming budget statement,” he said on Wednesday.
“His independent and external review of the outlook for public finances will add credibility to the process, helping to add stability in what is currently a volatile environment.”
The Oxford graduate also added that the government must ensure that its tax cuts and increased spending do not threaten long-term public finances, or the effectiveness of the Bank of England.
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In recent weeks, Threadneedle Street has been forced to launch a £65bn bond-buying program to calm markets.
He intervened for the third time in a week on Tuesday to try to boost investor confidence and prevent a public debt sell-off. However, Andrew Bailey last night warned that this support was due to end on Friday, despite calls for it to be extended.
Addressing recent inventions, Pill said: “In response to the dysfunctions that have emerged in specific market segments in recent weeks, the Bank is conducting a series of temporary and targeted financial stability operations to support the gilt market.
“Their objective has been to enable an orderly deleveraging of positions held by so-called Liability Driven Investment (LDI) funds, which have become vulnerable in the volatile market conditions we have been experiencing of late.
“In taking this action, the Bank sought to prevent the emergence of a self-perpetuating vicious spiral of collateral calls, forced sales and vanishing liquidity in a central segment of the financial markets. functioning of the market helps reduce any risk of contagion to credit conditions for UK households and businesses.”