More interest rate rises could be coming as the Bank of England has so far been unable to declare victory in its battle with rising inflation, its top economist said on Tuesday.
Huw Pill said there was “more to do” on interest rates and issued a warning that the UK was entering a recession forecast to last into 2024.
The Bank of England last week unveiled its biggest rise in interest rates in more than three decades as it tried to tame soaring inflation that has led to a cost of living crisis, with bills going up far faster than salaries.
The British government is also trying to get a handle on a series of competing, but partially linked, crises including the war in Ukraine, energy supply problems and inflation.
“I think we cannot declare victory against second-round effects, but we are entering a recession,” Mr Pill, the bank’s chief economist told the UBS European conference in London.
“It's a difficult trade-off environment for monetary policy.”
Mr Pill stressed that the bank's Monetary Policy Committee, which decides any changes to interest rates, were not “inflation nutters”.
“They have done some tightening but there is more to do,” he said. “That doesn't mean we're going to move at a predefined pace until kingdom comes.
“At some point you have to think about what level of rate is appropriate.”
On Tuesday, the chief economist highlighted that the UK is already entering a recession.
After the committee's latest meeting, the Bank said it did not expect the base interest rate to rise as high as markets had predicted.
UK Consumer Price Index inflation was at a 40-year high of 10.1 per cent in September on the back of rising food prices.
Last week, the Bank of England increased interest rates from 2.25 per cent to 3 per cent in its biggest single rise for 33 years.
It was the eighth consecutive jump in interest rates by the central bank, and the biggest increase since 1989.
The increase will put an average of about £3,000 ($3,442) a year on to mortgage bills for those households that are set to renew their mortgages, the Bank said.
It also gave a warning that the UK could be on course for the longest recession since reliable records began in the 1920s, as the economy faces a “very challenging outlook”.
Bank of England forecasts predict that inflation will peak at 10.9 per cent in the coming months.
