By Andy Bruce and Suban Abdulla
April 17 (Reuters) – Bank of England Chief Economist Huw Pill on Friday criticised his colleagues’ “wait and see” messaging on keeping policy on hold while the Iran war plays out, and said tackling inflation should be its main focus against other trade-offs.
His comments contrasted with those of BoE Governor Andrew Bailey, who said this week that the central bank should not “rush to judgements” in setting policy.
Bailey told Reuters this month that the BoE needed to keep a clear eye on risks to growth and jobs as well as inflation when making their next decision on rates.
Pill said a wait-and-see approach could be mistaken for looking neutral on the threat of higher inflation, even if holding interest rates represents a tightening of policy against previous assumptions of interest rate cuts.
“If you’re waiting and seeing and you don’t see, then you’ve just waited,” Pill told a roundtable event hosted by Barclays.
“And I’m not sure waiting is necessarily the appropriate response to the sort of inflationary dynamics which have the potential, at least, to have some self-sustaining momentum.”
He said the Monetary Policy Committee needed to be clearer that it had held interest rates because that was the appropriate level of monetary tightness for the economy, not because it was simply waiting and seeing.
Before the start of the war in Iran in late February, Pill had consistently argued for a slower pace of interest rate cuts, citing reservations about the persistence of inflation pressure in Britain’s economy.
He said on Friday that tackling this should be the BoE’s top priority.
“In my thinking, for all the discussion about trade-offs, which is there and we have to take into account, I think the primacy of keeping inflation towards target and keeping it there needs to be emphasised,” Pill said.
Investors on Friday moved to price in only one BoE quarter-point interest rate hike after Iran said the Strait of Hormuz would open during the current ceasefire, from between one and two on Thursday.
(Reporting by Andy Bruce; Editing by Muvija M)
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