Bank of England Governor Andrew Bailey has assured that the central bank is “not complacent” about curbing UK inflation, following cautionary remarks from its chief economist. In an interview with CNBC, Bailey expressed dissatisfaction with the Consumer Prices Index (CPI) inflation rate exceeding the Bank’s 2% target.
Bailey Responds to Pill's Warnings
Bailey acknowledged differing viewpoints within the Monetary Policy Committee, stating, “It’s perfectly reasonable for people to take different views. One of the strengths of our committee is that you do have quite different views that are expressed, and that’s good, I welcome that.” He specifically referenced chief economist Huw Pill, who has warned that inflation running one percentage point above target is “problematic.” Bailey noted, “Huw Pill does take a different view on that and he’s quite justified to take that position. Of course we’re concerned. We’re not complacent at all.”
Pill's Concerns and Rate Votes
Pill told the Press Association earlier this week that the Bank “should not be complacent” about the threat of rising CPI due to surging oil and gas prices amid the US-Israeli conflict with Iran. He emphasized that inflation above the 2% target “should be seen as problematic.” Official figures show UK CPI at 2.8% in April, unchanged from March, with the Bank forecasting a rise to 3.2% later this year.
Pill has voted to increase interest rates to 4% at the Bank’s last two meetings. In April, he was the sole dissenter, while in June, Megan Greene joined him. The majority, including Bailey, voted to keep rates unchanged at 3.75%.
Economic Context and Outlook
Bailey described the current situation as a “negative supply shock” with “higher inflation and weaker activity,” requiring a judgment on the appropriate path back to target. He stated, “I think it’s frustrating, but I do think that we’re operating against a softer economy at the moment so looking forwards… the evidence would suggest that we will come back to target, but frustratingly later than we thought we would.” He added, “I’m not happy about the fact that inflation is above target at all, but we do have to judge it in context and looking forwards.”
