The Bank of England appears to have move a step closer towards increasing the cost of borrowing next month after its new chief economist, Huw Pill, said the UK’s recovery from the pandemic was strong enough for the central bank to take “policy action”, despite fears over the new Covid strain.
Pill, a member of theBank’s nine-strong monetary policy committee (MPC), indicated he was preparing to vote in favour of an increase in interest rates on 16 December after official figures suggested concerns about a jump in unemployment at the end of the furlough scheme had proved unfounded.
Speaking at a CBI conference in Tyne and Wear, Pill said he wanted to increase interest rates to calm inflation if the potential hit to the economy was minimal. “In my view, the ground has now been prepared for policy action,” he said
The former Goldman Sachs economist, who joined the central bank in September, said there was a risk workers would react to rising inflation by demanding higher wages, feeding into a wage-price spiral that would damage the economy.
Bank forecasts suggest the consumer prices index (CPI) will hit 5% next spring, having risen to 4.2% in October.