Bank of England: Growth is slowing, but that’s not slowing inflation
The Bank of England’s chief economist has warned that though UK growth is slowing, it is not necessarily slowing inflation as fast as the central bank would have hoped.
“There’s slower growth in activity and employment… but because I think that is more supply-driven rather than demand-driven, the weakening of activity is not as associated with easing of inflationary pressures,” he told the Financial Times in an interview.
The remarks mark a change in tone for Pill who last month publicly speculated on rate cuts next summer.
Since then Andrew Bailey and other Bank of England figures have rowed back Pill’s comments, saying it was too early to say.
Pill in fact told the FT that his own vote to hold the interest rate rather than push for a hike in the last two months had been “very finely balanced.”
Inflation has been falling but pay growth and services inflation in particular suggest that a spiral of sorts is already embedded into the economy.
“When I look at the prints of those indicators through the last few months, I see more evidence of the sort of stubborn, high level rates of inflation or growth that are stronger than we would really see as compatible with price stability, 2 per cent inflation, over the medium term,” Pill said.
The Bank of England has been heavily criticised for decisions made at the start of the present inflationary wave, and for a perceived willingness to then point the finger at external factors.
The governor in particular has come to regret his use of the word “transitory” to describe a wave of price hikes which swiftly spiralled into the fast inflationary cycle in recent memory.