LONDON, Feb 27 (Reuters) – Bank of England Chief Economist Huw Pill said on Friday that the central bank should not be too reassured by falls in headline inflation where these are driven by one-off factors, as underlying price pressures continued to persist.
The BoE forecasts that consumer price inflation – which fell to 3% in January – will drop back to close to its 2% target in April, when cuts in regulated energy prices take effect and the impact of regulated price rises a year earlier drop out of the annual inflation series.
“I think it is … important to recognise that the (disinflation) process is still incomplete. We shouldn’t be lulled into a false sense of security by movements in headline inflation which are partly driven by fiscal events or other events,” Pill said in a webinar hosted by Britain’s Society of Professional Economists and consultancy firm Elgin Advisory.
“Underlying inflation is probably still running above target,” he added.
Earlier this month, Pill said that he believed the underlying rate of inflation in Britain risked settling at a rate of around 2.5% and that surveys of businesses’ price- and wage-setting plans suggested these may pick up again, despite headline inflation being due to fall back to target.
Pill voted against the BoE’s last three interest rate cuts and in minutes of this month’s Monetary Policy Committee decision he said rates had been cut too fast and that inflation pressures “still needed to be contained and eliminated”.
(Reporting by David Milliken; writing by Suban Abdulla; editing by Sarah Young)
Comments