BoE’s Huw Pill concerned by persistence of inflation

Bank of England chief economist Huw Pill expressed concerns on Wednesday about the persistence of inflation in the UK.

Speaking at Asia House in London, Pill said recent data suggested that inflation could remain high for longer than expected.

"The current restrictive monetary policy stance continues to bear down on the persistent component of UK inflation," Pill said.

"The MPC needs to ensure that the degree of cumulative restriction in the monetary policy stance is sufficient to ensure that the persistent dynamic in recent inflation indicators is squeezed out of the system in a way that is consistent with a timely and sustained return of CPI inflation to the 2% target.

"At annual rates still not far from 6%, annual services price inflation and wage growth continue to point to an uncomfortable strength in those underlying inflation dynamics.

"But the latest data also remains consistent with the view that these inflationary pressures have now been contained, and may be starting to revert towards levels that are more consistent with the achievement of the inflation target."

Data released last month by the Office for National Statistics showed that annual consumer price inflation fell to 2% in May from 2.3% in April, in line with expectations.

It marked the first time inflation has hit the Bank of England’s target since July 2021 and left the door open for a potential rate cut from the Bank this summer. Inflation peaked at 11.1% in October 2022, hitting its highest level since 1981.

However, services inflation was 5.7% in May, down from 5.9% the month before but missing expectations for a drop to 5.5%.

Pill said that in the absence of any big new shocks, the "when-rather-than-if" characterisation of prospective Bank Rate cuts "still seems appropriate".