BoE's Pill says a rate hike need not be start of long series

A future Bank of England rate increase should not be read by investors as the beginning of a long run of rises, the central bank's chief economist Huw Pill said on Thursday, according to remarks reported from a panel in Bangkok.

"We shouldn't give the impression that because we act now, we are on another staircase … like we saw in 2022 and 2023. It's a different shock," Pill said during a discussion hosted by the Bangkok Economic Festival on the sidelines of International Monetary Fund meetings in the city.

The comments follow his push on Wednesday against financial market bets on four rate rises over the next 12 months. Unlike the US Federal Reserve and the European Central Bank, the BoE has held rates since the outbreak of the US-Iran war in February, though markets reportedly see a quarter-point increase after next week's meeting as a near certainty. Pill has voted for higher rates since April.

Pill repeated his concern that Britain was vulnerable to what he called "insidious" catch-up dynamics in inflation, as workers sought wage rises to compensate them for price rises. "You probably need to have more of a prolonged period of restriction to squeeze that," he said.

He added that higher bond yields in advanced economies probably reflected, at least in part, a rise in the real neutral rate of interest needed to stabilise inflation — another factor he said pointed to the need for higher rates.