The UK’s central bank will need to remain flexible on interest rates as inflation spikes but the country’s economy slows, according to a senior official at the bank..
“The statement that we put out collectively is one that I think had a certain level of flexibility because it had to encompass those different views,” Bank of England’s chief economist Huw Pill told Bloomberg TV on Friday.
The Bank of England warned this week that inflation will hit 11% by Autumn in a squeeze on households not seen since the 1970s.
“But at the same time, I think what we were trying to emphasise is that that flexibility also applies to what the decisions are. I don’t think it’s all about August. We talked about the pace, timing and scale of future decisions.”
The next meeting of the bank’s monetary policy committee is scheduled to take place on 4th August.
Raising interest rates too fast could cause the economy to further slow, but not raising them fast enough could lead to faster inflation and higher costs.
On Thursday, the Bank of England said that it was prepared to “forcefully” snuff out the risks posed by rampant inflation if necessary, as it raised interest rates for the fifth time since December.
Responding to this comment, Mr Pill said: “I think the word ‘forcefully’ – which clearly is the word the market is focused on, you focused on, and has a meaning – it’s also important to see that that was put in the context of ‘if necessary we will act forcefully’, and so there’s a conditionality there.”