The UK economy could be facing another period of high and rising inflation, limiting the possibility of interest rate cuts this year, the chief economist of the Bank of England has warned. <\/p>\n
Huw Pill, a member of the monetary policy committee, said there was a risk that recent rises could lead to \u201cmore persistent inflation\u201d after the Bank said annual consumer price growth would peak at 4 per cent in September. <\/p>\n
Pill\u2019s comments are his first since he voted to keep interest rates unchanged at the Bank\u2019s August meeting, where there was a 5-4 vote to cut the base rate to 4 per cent<\/a> \u2014 a two-year low and the fifth reduction in the past 12 months. <\/p>\n The MPC\u2019s vote was far closer than expected and underlines growing worries inside the committee that inflation will remain stuck above the 2 per cent target<\/a>. The Bank also raised its medium-term inflation forecast and does not expect the target to be hit until 2027. <\/p>\n Pill said rising inflation and the risk that this could lead to higher pay increases and companies raising prices was \u201cwhere more of the dissenting members\u2019 focus\u201d was. <\/p>\n Stubborn inflation could mean the MPC may \u201chave to question whether the pace at which we\u2019re reducing Bank rate over the last year, at a pace of one quarter-point cut every quarter \u2013 is that sustainable?\u201d Pill said. <\/p>\n \u201cI think that\u2019s kind of where more of the dissenting members\u2019 focus was, the members of the committee who were voting ultimately to hold rates at 4.25 per cent yesterday.\u201d<\/p>\n Pill and Clare Lombardelli, the Bank\u2019s deputy governor for monetary policy, were the two permanent policymakers who did not want to cut interest rates, along with two external members, Catherine Mann and Megan Greene. <\/p>\n Splits within the committee have led traders to cut back their bets on another interest rate cut this year. <\/p>\n