LONDON (Reuters) -Bank of England Chief Economist Huw Pill said on Tuesday he thought a quarterly pace of interest rate cuts had been too fast given the inflation outlook but his vote this month to keep borrowing costs on hold was likely to prove “a skip”.
The BoE cut interest rates by a quarter point to 4.25% on May 8 in a three-way split vote, with two members of the Monetary Policy Committee (MPC) favouring a bigger cut, and two – including Pill – favouring a hold.
“I would characterise my May vote as favouring a ‘skip’ within a continuing withdrawal of monetary policy restriction, rather than a halt to the process of withdrawal,” Pill said in a speech at Barclays in London.
“It should not be seen as favouring a halt to – still less a reversal – of that withdrawal of restriction.”
Pill said the quarterly pace of rate cuts since mid-2024 had been “too rapid”.
While interest rates remain on a downward path and the underlying process of disinflation is intact, indicators of persistence in price pressures were still a cause for concern and colleagues on the MPC shared similar worries, he added.
“(As) long as disinflation back to target is not complete, maintenance of some restriction will still be required. On my reading, that is a view that is held across a broad swathe of MPC members,” Pill said.
He said the recent use of scenarios by the BoE in its quarterly economic outlook were useful because they helped to show some of his concerns about the inflation outlook that “run beyond” the central view.
(Reporting by William Schomberg, writing by Andy Bruce; editing by Suban Abdulla)
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