Interest rates may need to rise this year, says Bank of England economist
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- Huw Pill, the Bank of England's chief economist, said interest rates may need to rise this year to keep inflation in check, arguing the economy's "speed limit" is lower than it used to be.
- UK inflation stood at 2.8%, above the Bank's 2% target, with Pill noting that during his 56 months at the Bank, inflation has been at or below target for only three months and above it for the remaining 53.
- Pill was in the minority of the nine-member Monetary Policy Committee who voted for an interest rate hike in June, making him a hawkish outlier among rate-setters.
- Welsh productivity is around 15% lower than the UK average and the lowest of the four home nations, which Pill attributes to infrastructure gaps and workforce skill levels.
- Before joining the Bank, Pill worked at the European Central Bank from its inception through the Eurozone crisis, and he attended Whitchurch High School in Cardiff — whose alumni include some of Wales' best-known sports stars.
- Pill said he has seen the Bank of England's 400,000 gold bars stored in its vaults only once, describing them as "very heavy" and "amazingly shiny."
Why it matters: Pill sits on the nine-member MPC and represents its hawkish minority, so his public call for higher rates puts direct pressure on fellow policymakers who voted to hold. With UK inflation still 0.8 percentage points above the 2% target, any rate increase would raise borrowing costs for mortgage holders while handing savers a better return — a tension that increasingly divides the rate-setting committee.
