Bank of England's Pill urges rate cut caution after Bailey suggested faster pace
BoE's Pill sees need for caution over rate cuts
Pill opposed start of BoE rate cuts in August
Sterling strengthens after Pill's remarks
Pill says BoE inflation models might understate risks
Updates with economist and market reaction, detail from speech
By David Milliken and William Schomberg
LONDON, Oct 4 (Reuters) -The Bank of England should move only gradually with cutting interest rates, Chief Economist Huw Pill said on Friday, a day after Governor Andrew Bailey was quoted as saying the BoE might move more aggressively to lower borrowing costs.
Pill warned of lingering inflation risks in a speech that prompted a partial recovery in sterling after it slumped on Thursday following Bailey's comments.
"While further cuts in Bank Rate remain in prospect should the economic and inflation outlook evolve broadly as expected, it will be important to guard against the risk of cutting rates either too far or too fast," Pill told the Institute of Chartered Accountants in England and Wales.
"For me, the need for such caution points to a gradual withdrawal of monetary policy restriction."
The BoE's Monetary Policy Committee is expected to cut interest rates by a quarter-point at its next meeting in November. It cut rates for the first time in more than four years in August, a decision which Pill opposed.
Financial markets are more divided about whether the BoE will follow a rate cut in November with another in December. The BoE has not cut rates at consecutive meetings since 2020.
Bailey told the Guardian newspaper that the central bank could move more aggressively to cut rates if there was further welcome news on inflation.
Sterling rose by a fifth of a cent against the U.S. dollar when Pill's speech was published, having plunged by more than a cent on Thursday.
Investors have largely expected the BoE to cut rates more slowly than the U.S. Federal Reserve and the European Central Bank, a view which Bailey's comments challenged.
Andrew Goodwin, chief UK economist at Oxford Economics, said the chance of a December rate cut was rising as he judged Bailey's view was more representative of the majority on the BoE's nine-member Monetary Policy Committee.
"The Budget on October 30 is likely to be a decisive factor in whether Bailey's camp decides to step up the pace of rate cuts, particularly given the recent speculation that the fiscal rules will be changed in a way that allows looser fiscal policy," Goodwin said.
Finance minister Rachel Reeves has said higher taxes are likely at her first budget since Labour returned to government on July 4 but she and Prime Minister Keir Starmer have also stressed the importance of boosting investment.
Pill said he remained concerned about the possibility of structural changes in Britain's economy that could sustain inflation pressures, which gave "ample reason" for caution in assessing how quickly that persistence would lift.
Pill also said that inflation among services firms and pay growth represented "a continued source of concern".
An alternate economic forecasting model - which had similar starting assumptions to the BoE's main model, but did not have the same built-in constraints on possible outcomes - showed inflation staying slightly above 2% over the medium term.
Pill said the alternate model should be taken seriously, and that it suggested the neutral interest rate and the natural rate of unemployment could both be higher than the BoE had assumed.
"I am worried more about inflation than what's reflected in the MPC's published forecasts," he said.
Reporting by William Schomberg and David Milliken; Editing by Suban Abdulla and Angus MacSwan
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إخلاء المسؤولية: تتيح كيانات XM Group خدمة تنفيذية فقط والدخول إلى منصة تداولنا عبر الإنترنت، مما يسمح للشخص بمشاهدة و/أو استخدام المحتوى المتاح على موقع الويب أو عن طريقه، وهذا المحتوى لا يراد به التغيير أو التوسع عن ذلك. يخضع هذا الدخول والاستخدام دائماً لما يلي: (1) الشروط والأحكام؛ (2) تحذيرات المخاطر؛ (3) إخلاء المسؤولية الكامل. لذلك يُقدم هذا المحتوى على أنه ليس أكثر من معلومات عامة. تحديداً، يرجى الانتباه إلى أن المحتوى المتاح على منصة تداولنا عبر الإنترنت ليس طلباً أو عرضاً لدخول أي معاملات في الأسواق المالية. التداول في أي سوق مالي به مخاطرة عالية برأس مالك.
جميع المواد المنشورة على منصة تداولنا مخصصة للأغراض التعليمية/المعلوماتية فقط ولا تحتوي - ولا ينبغي اعتبار أنها تحتوي - على نصائح أو توصيات مالية أو ضريبية أو تجارية، أو سجلاً لأسعار تداولنا، أو عرضاً أو طلباً لأي معاملة في أي صكوك مالية أو عروض ترويجية مالية لا داعي لها.
أي محتوى تابع للغير بالإضافة إلى المحتوى الذي أعدته XM، مثل الآراء، والأخبار، والأبحاث، والتحليلات والأسعار وغيرها من المعلومات أو روابط مواقع تابعة للغير وواردة في هذا الموقع تُقدم لك "كما هي"، كتعليق عام على السوق ولا تعتبر نصيحة استثمارية. يجب ألا يُفسر أي محتوى على أنه بحث استثماري، وأن تلاحظ وتقبل أن المحتوى غير مُعدٍ وفقاً للمتطلبات القانونية المصممة لتعزيز استقلالية البحث الاستثماري، وبالتالي، فهو بمثابة تواصل تسويقي بموجب القوانين واللوائح ذات الصلة. فضلاً تأكد من أنك قد قرأت وفهمت الإخطار بالبحوث الاستثمارية غير المستقلة والتحذير من مخاطر المعلومات السابقة، والذي يمكنك الاطلاع عليه هنا.
