Central bank chief economist Huw Pill indicated that further rate hikes are necessary after the base rate climbed from 3.75% to 4%, with another increase now viewed by analysts as almost inevitable next month. Inflation is projected to touch 5% by next spring due to high oil and gas costs alongside demands for larger wage increases following a 0.7% economic expansion in the third quarter. Meanwhile, households face compounding pressures from an energy price cap nearing £2,000 alongside an average council tax hike of almost 5%.
Key points
Chief economist Huw Pill views financial market forecasts of interest rates approaching 5…: Chief economist Huw Pill views financial market forecasts of interest rates approaching 5% in 2027 as reasonable to return inflation to the 2% target.
Accelerating third-quarter economic growth of 0.7% risks sparking higher wage demands tha…: Accelerating third-quarter economic growth of 0.7% risks sparking higher wage demands that could trigger prolonged second-round inflationary effects.
Higher borrowing costs threaten to compound difficulties for the construction and manufac…: Higher borrowing costs threaten to compound difficulties for the construction and manufacturing industries while households face rising energy and council tax bills.
Sources checked by our analysis pipeline: 1
The Bank of England will probably need to raise interest rates next month and again in early 2027 to combat rising inflation, its chief economist has said.
Signalling a sharp rise in mortgage payments for an estimated 2.3 million homeowners who will have to refinance their loans next year, Huw Pill said that while the decision to nudge interest rates from 3.75% to 4% earlier this month was a “significant step” towards getting monetary policy into a better place, “we have further to go”.
Pill told the Financial Times: “My view would be, we will see evidence that motivates further rises,” adding that the central bank would “do what is necessary to get inflation back to 2% through time”.
The chief economist is one of a number of the Bank’s policymakers who believe the UK economy has gained in strength over the last year, handing workers the power to bid up wages.
Recent figures showed the economy grew by 0.7% in the third quarter, to give an annual rate of growth that was only surpassed by the US among the…
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