The top economist of the Bank of England has said that cuts to interest rates are still “some way off” and that the British economy is currently weak.
Huw Pill that BoE chief economist said that policymakers must not feel a “false sense of security” even if inflation falls below the target rate of 2%.
During a speech at Cardiff University Pill said, “In my baseline scenario the time for cutting Bank Rate remains some way off.
“I need to see more compelling evidence that the underlying persistent component of UK CPI (Consumer Prices Index) inflation is being squeezed down to rates consistent with a lasting and sustainable achievement of the 2% inflation target before voting to lower Bank Rate.”
He insisted that it would be “good news” if the inflation target was met which he believes will fall.
Pill said, “I expect to see headline consumer price inflation continue to fall in the coming months, and likely to approach or even fall below the 2% inflation target this spring. Of itself, that is good news.
“But the drivers of this decline in annual headline inflation are a combination of base and external effects.
“We need to guard against being lulled into a false sense of security about inflation developments over the medium term by the mechanical effects of high monthly inflation a year ago dropping out of the calculation of annual rates and/or the impact of downside surprises in international commodity prices, notably for energy and food.”
