Economist urges Bank of England to be ‘more cautious’ with interest rate cuts | Personal Finance | Finance

The Bank of England should be “more cautious” when reducing interest rates due to persistent inflation concerns, the institution’s top economist has cautioned. Huw Pill, the Bank’s chief economist, told an audience in London that he “would expect further cuts” to borrowing costs over the coming year if conditions align with forecasts.

However, he emphasised the importance of policymakers avoiding slashing rates “too far or too fast”. Mr Pill was among the central bank’s nine-member monetary policy committee (MPC) who backed maintaining interest rates at 4% last month. They are widely anticipated to hold borrowing costs at this level during next month’s gathering following a recent rise in inflation, which stood at 3.8% in its latest reading.

The Bank has indicated it believes interest rates reached their peak at 4% in September – considerably higher than the 2% target established by both the Bank and Government.

Speaking 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 stated that the CPI (consumer price index) inflation has been “stickier” than the Bank had expected since interest rates reached their target levels last year.

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