BoE Pill hints at possible rate cuts if growth stalls
The Bank of England’s Monetary Policy Committee raised rates for the first time in over three years, citing a worsening energy shock but also noting surprisingly strong growth figures. While financial markets assign a 60% chance of another hike next month and anticipate at least two increases in the next year, Pill, a senior BoE official known for his hawkish stance, suggested that further rises could be avoided if the economy weakens. He said a hold or even a cut in the bank rate is possible should growth stall and the threat of second-round effects diminish.
Pill highlighted upside risks from energy and questioned whether the current resilience in growth and employment can be sustained. The MPC’s unanimous decision also signalled more hikes could follow if the Iran war continues, though oil and gas prices fell after the US midterm elections raised hopes of an end to the conflict. Upcoming data are expected to show a 0.7% quarterly GDP rise, yet households may start tightening spending as domestic energy bills are set to increase by a quarter in January. The BoE forecasts 1.6% growth this year—the strongest in four years—before expecting momentum to ease in 2027 and 2028 as consumer and business pressures build.
Pill ruled out repeating the aggressive rate increases seen after the 2022 inflation shock, noting the current energy price rise is smaller than after Russia’s invasion of Ukraine.
Why it matters
Bank rate direction affects borrowing costs for businesses and consumers, influencing financial planning and investment decisions.
FAQ
What did Pill say about future bank rate moves?
He said the bank rate could remain on hold or fall if growth stalls and second-round effects weaken.
What is the market’s view on upcoming rate hikes?
Markets see a 60% chance of a hike next month and expect at least two increases over the next 12 months.
What growth forecast does the BoE have for this year?
The BoE predicts 1.6% growth this year, the strongest in four years.
Source: Economic Times Markets. See the original source for full details.
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