Pill said the latest fiscal measures from Chancellor of the Exchequer Kwasi Kwarteng would probably boost the economy. He said it’s too early for the central bank to “declare victory” on holding expectations about future price increases to its 2% target.
The remarks are the latest to underscore the likelihood that borrowing costs will keep rising as the UK struggles to contain inflation, which is near its highest level in 40 years.
Pill, in a text of a speech, didn’t dwell on market turmoil touched off by the BOE’s determination to end emergency support for bond markets this Friday. Instead, he focused his remarks on the reasons policy makers see pointing to higher rates.
“Given the uncertain world and volatile markets we face, November can seem a long time away,” Pill said in the text of a speech released as he spoke in Glasgow on Tuesday. “At present, I am still inclined to believe that a significant monetary policy response will be required to the significant macro and market news of the past few weeks.”
On the government’s economic plan, Pill said, “these fiscal announcements will, on balance, provide a further stimulus to demand relative to supply over the medium-term” and that “this will add to the inflationary pressure.”
He said it’s crucial for the BOE to stick to its mandate on inflation to maintain the credibility of the UK’s economic framework, noting that the Treasury’s growth program set out in September was the trigger for the latest chaos in markets.
“The volatile market dynamics that followed the announcement of the Growth Plan underline the need to bolster the credibility of the wider institutional framework,” Pill said. “Whether reflecting pressures from the fiscal, financial or other domains, it is essential that the credibility, stability and integrity of the institutional framework governing UK macroeconomic policies are maintained.”
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Source: Economy - investing.com
