LONDON, Sept 3 (Reuters) – Bank of England Chief Economist Huw Pill said that raising interest rates now would help reduce the chance that the central bank has to be more aggressive in future to tame inflation which has picked up as a result of the Iran war.
“Raising Bank Rate … need not be the start of a prolonged and aggressive series of increases,” Pill said in comments that he was due to deliver to the Edinburgh Chamber of Commerce later on Thursday.
“Implemented and communicated effectively, a prompt increase in Bank Rate may serve to head-off some of the potential insidious ‘catch up’ nominal dynamics that threaten to make temporary departures of inflation from target more persistent,” he added.
Pill and two other Monetary Policy Committee members voted to raise interest rates in July. But they were outvoted by colleagues who preferred no change as they awaited clearer signs of what the Iran war means for long-term inflation pressures.
Investors in interest rate futures on Thursday priced the chance of a quarter-point rate hike at the MPC’s next meeting this month at little more than 15% although that probability rose to more than 70% for the subsequent meeting in November.
(Writing by William Schomberg and David Milliken)
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