Bank of England’s top economist calls for ‘more cautious’ interest rate cuts

The Bank of England should be “more cautious” over reducing interest rates due to concerns over stubborn inflation, its top economist has warned.

Huw Pill, chief economist at the Bank, said in a speech in London that he “would expect further cuts” in the interest rate over the next year if conditions are in line with expectations.

But he stressed that it is important that rate-setters at the bank do not seek to cut borrowing costs “too far or too fast”.

Mr Pill was among members of the central bank’s nine-strong monetary policy committee (MPC) to vote in favour of holding interest rates at 4% last month.

They are widely expected to keep interest rates at this rate at next month’s meeting after recent uptick in inflation, which was most recently recorded at 3.8%.

The Bank has said it expects interest rates to have peaked at 4% in September – significantly above the 2% target rate set by the Bank and the Government.

On Friday, Mr Pill said: “My view that the MPC should adopt, from this point forward, a more cautious pace in withdrawing monetary policy restriction so as to ensure continuation in disinflation towards the 2% target.

“As I said in May, I continue to view a decision to keep Bank Rate on hold as a ‘skip rather than a halt’ in monetary policy normalisation.

“But the need to recognise the stubbornness of inflationary pressures is becoming more pressing.”

The economist said that CPI (consumer price index) inflation has been “stickier” than the Bank has anticipated since interest rates hit target levels last year.

“Given our unambiguous commitment to meeting the 2% inflation target, the lack of progress over the past year is obviously disappointing,” he added.