Bank of England’s chief economist Pill sees more rate hikes down the line

Further rate hikes will be needed to tame the worst inflation crunch in a generation, the Bank of England’s top wonk said today.

Huw Pill, who succeeded Andy Haldane as the Bank’s chief economist last September, said at an Institute of Chartered Accountants in England and Wales event that in his view, getting inflation back to Threadneedle Street’s two per cent target “will require further tightening of monetary policy over the coming months”.

The comments chime with hawkish remarks earlier this week from fellow monetary policy committee member, Catherine Mann, who did not rule out the prospect of a 50 basis point rise in the future.

Inflation has climbed to a 40-year high of nine per cent, but is expected to peak at just over 11 per cent in October when the energy watchdog hikes the cap on bills again.

New cost of living figures covering May published tomorrow by the Office for National Statistics are forecast to have edged higher to 9.1 per cent

In response to that price surge, the Bank has raised rates at each of its last five meetings, taking them to a 13-year high of 1.25 per cent. It opted against a larger rise last week.

Pill, a former Goldman Sachs banker and academic, did roll back against Mann’s hypothesis set out earlier this week that a quicker policy tightening cycle would shield the pound from weakening sharply against the dollar and euro.

“Monetary policy is not a panacea. Monetary policy is not an instrument that allows you to achieve lots and lots of different things at short term: stabilise the exchange rate, fine-tune developments in employment or activity,” Pill said.

The two MPC members voted differently at last week’s meeting. Pill favoured a 25 basis point rise, while Mann backed a 50 basis point increase. Governor Andrew Bailey sided with Pill.