BOE's Pill: Outlook for bank rate beyond coming months is uncertain

Bank of England Chief Economist Huw Pill said on Wednesday that a case can be made for a measured rather than an activist approach to policy decisions, as reported by Reuters.

Additional takeaways

"Must focus on more persistent developments in the data that have lasting implications for the outlook for price stability."

That is what I would label a ‘steady handed’ approach to monetary policy."

"Since September, BOE has consistent, measured and resolute set of actions intended to rebalance the stance of monetary policy and address the inflationary pressures."

"We have signalled that more is to come in the coming months if the path sketched out in our February forecast plays out."

"Equally we have flagged that the outlook for bank rate beyond the coming months is uncertain, reflecting the two-sided risks to inflation."

"Decision to vote for 25 bp hike rather than 50 bp decision was finely balanced for me as an individual voter on the MPC."

"I am sceptical of efforts to return bank rate quickly to some pre-defined neutral level or terminal rate."

"Such an approach risks increasing inflation and output volatility if the policy is miscalibrated."

"Better to adopt a more measured and data-dependent approach, which learns from how the economy responds to each step taken rather than pre-commits to a concept surrounded by uncertainty."

"Unusually large policy steps may validate a market narrative that bank policy is either foot-to-the-floor on the accelerator or foot-to-the-floor with the brake."

"I would certainly not wish to rule out changes in bank rate of more than the usual 25bp in all circumstances."

"Given the inflationary pressures we currently face, I can certainly understand why colleagues on the MPC voted for a 50bp hike last week."

"Restricting ourselves to a 25bp now – albeit with the prospect of more to come in the coming months – is an investment in containing market expectations of aggressive activism."

Market reaction

The GBP/USD pair edged slightly lower from session highs after these comments and was last seen trading at 1.3565, where it was up 0.18% on a daily basis.