BoE chief economist Pill backs 'restrictive' monetary policy

The Bank of England’s chief economist backed keeping interest rates at their current record levels on Thursday, as the central bank continued to prioritise tackling inflation.

In a speech to the Institute of Chartered Accountants in England and Wales, Huw Pill said that now monetary policy was in "restrictive territory", the central banks did not need to raise rates "in order to bear down on inflation".

Instead he argued: "Sustaining rates at their current restrictive level will continue to bear down on inflation.

"It is that maintaining of the restrictive stance that is key to achieving the inflation target.

"We are becoming more confident that we can bring inflation to target, but we will keep interest rates at the current level for an extended period."

His comments echo those made by governor Andrew Bailey, who on Wednesday said it was too early to talk about rate cuts.

The BoE has raised interest rates 14 times since the end of 2021, and the cost of borrowing now stands at 5.25% - a 15-year high.

Last week the Monetary Policy Committee held rates for the second time and downgraded its growth forecast, leading to speculation that the current rate tightening cycle had paused. Most now expect the next move to be a cut, although rates are not forecast to start falling until late summer 2024.

Inflation meanwhile has eased back from a high of 11.1% reached in October 2022, but at 6.7% it remains well above the BoE’s 2% target.

The BoE currently does not expect it to meet that target until the end of 2025.