Interest rate decision is ‘live'

Price inflation remains high on the list of concerns for policymakers ahead of the next Bank of England interest rate decision.

The Bank of England will have a ‘live’ decision to make when it meets this month to decide on any changes to the Bank interest rate.

According to the Bank’s new chief economist Huw Pill, price inflation is likely to reach or exceed 5% by early next year.

Speaking to the FT, Pill warned that the Bank’s Monetary Policy Committee would have a ‘live’ decision to make about interest rates when it meets on 4th November.

His warning follows recent guidance from Bank of England governor Andrew Bailey, who told markets the Bank would “have to act” on rising price inflation.

Interest rates in the UK have been at their current historic low of 0.1% since the onset of the pandemic in March 2021.

However, as the UK economy recovers from the impact of the pandemic, policymakers are keeping a close eye on rising prices, with an interest rate hike one tool at their disposal to bring price inflation under control.

The latest official figures show price inflation, as measured by the Consumer Prices Index, at 3.1% in the year to September, slowing very slightly on the previous month.

However, further inflationary pressures from rising wholesale energy prices are expected to push inflation higher in the near term.

Huw Pill took over the role of chief economist at the Bank of England from Andy Haldane last month and told the FT he would “not be shocked” if price inflation reached or exceeded 5% in the next few months. He said:

“That’s a very uncomfortable place for a central bank with an inflation target of 2% to be.”

However, Pill did not disclose how he would vote at the next Monetary Policy Committee meeting, saying the decision was “finely balanced” and “I think November is live”.