The Bank of England is likely to raise interest rates at a slower pace this year than in 2022, but it needs to take care not to end its cycle of hikes too soon, BoE Chief Economist Huw Pill said on Thursday.
Pill's remarks - delivered in a
speech at the University of Warwick in central England - stuck fairly closely to others he has made since the BoE raised its main interest rate from 3.5% to 4% this month.
"Continuing to raise rates at the pace and magnitude
seen over the past year would eventually - and perhaps soon -
imply that monetary policy had cumulatively been tightened too
much," Pill said.
"Nevertheless, given where we stand, I still choose to emphasise the MPC's need to be watchful for signs of greater-than-expected persistence in inflationary pressure."
Financial markets currently expect the BoE's Monetary Policy Committee to raise rates just twice more - in quarter-point increments - to peak at 4.5% by June, with a risk that it stops earlier at 4.25%.
In its
February policy statement , the BoE dropped a previous reference to raising rates "forcefully" if necessary.
On Wednesday, data showed that
consumer price inflation dropped to 10.1% in January from 10.5% in December, moving further from a 41-year high of 11.1% recorded in November.
"It remains premature to declare victory over the unacceptably higher rates of inflation we have seen recently," Pill said.
Rising job vacancies and other signs of cooling in
labour market data released on Tuesday were in line with the central bank's expectations, but the job market still remained tight and a source of rapid nominal wage growth, he added.
"Both the March and May MPC meetings represent points at which the Committee can again assess the implications of incoming data for the monetary policy stance," Pill said. (Reporting by David Milliken; Editing by Sachin Ravikumar, Kirsten Donovan and John Stonestreet)
