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Bank of England’s Huw Pill Casts Doubt on December Rate Rise -Breaking

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© Reuters. Bank of England’s Huw Pill Casts Doubt on December Rate Rise

(Bloomberg) — Bank of England Chief Economist Huw Pill cast doubt on the certainty of an interest rate increase in December, noting the decision would be “finely balanced” and pointing out bumps in the economic recovery.

Speaking at an event in Bristol, Pill said there’s “no quick fix” to bring inflation back to the 2% target and that the central bank doesn’t have the tools to fix supply chains that were upended by Brexit and the pandemic.

The remarks echo Pill’s comments from the before the bank’s surprise decision to leave borrowing costs on hold in November. This may make it difficult to predict the next move, as investors are almost certain that they have priced.

“I came to the bank, thinking the recovery is well established, there is momentum in the economy, inflationary pressures are building,” Pill told reporters after his meeting. “The burden of proof perhaps a little bit in is the other direction, so now I’m looking for reasons for it not to happen, rather than reasons to happen.”

Pill was a September member of the Monetary Policy Committee. He also rejected critics regarding the communication style used by policy makers. He said the BOE “can’t get caught up in minute-to-minute” commentary. “We can’t get caught up in media/market driven dynamics.”

Policy makers led by Governor Andrew Bailey have become increasingly vocal about the bank’s need to prevent an upward spiral in wages and prices. October’s inflation was 4.2%. This is the highest rate in 10 years, and it exceeded the target. 

Although bank employees expect that the reading will rise even more, Pill and his coworkers remain unsure about when they will take action. The BOE mentioned a number of uncertainties, including rising Covid cases and an increase in energy prices. They also warned about trade friction with Europe. 

“I don’t think about my decision about any one indicator,” Pill said. “I have comfort there’s momentum in the activity in the recovery” and the BOE is focused on communicating in a way that emphasizes the “underlying movements” in the economy.

“I genuinely do not know today how I will vote” on rates in December, Pill said. “There’s a genuine uncertainty even in my own mind about how I’ll vote” and risks to the economy are “two sided.”

 

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