Bank of England’s top economist dismisses hopes of big interest rates cuts in further blow to Rachel Reeves
Bank of England’s top economist dismisses hopes of big interest rates cuts in further blow to Rachel Reeves
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Huw Pill warned ‘we’re not in a situation where we can declare job done’ on inflation. Huw Pill, the Bank’s chief economist, pointed to a more “careful” approach instead. The growth downgrade was described as a “wake-up call” for Ms Reeves, whose future in the role is being questioned. Asked on Friday whether the Bank could cut UK interest rates by half a percentage point, as two policymakers voted for this time around, Mr Pill pointed to higher than expected pay growth of 3.7 per cent.
![[Chief economist of the Bank of England Huw Pill (Bank of England/PA)]](https://static.independent.co.uk/2024/10/04/10/01142726-f8cc4e1a-524a-4361-90e3-9d9db1c44829.jpg)
He said the rates were “a little bit higher than we had expected, and maybe it's still a little bit higher than we would see as consistent with achievement for the inflation target.". "I think that is a reason for caution, for carefulness in the way we proceed with removing monetary policy restriction and cutting bank rate," he added. He also warned that when it comes to inflation “we’re not in a situation where we can declare job done”.
On Thursday the Bank announced a cut in interest rates from 4.75 per cent to 4.5 per cent. The move will provide relief for businesses, as well as hundreds of thousands of people with mortgages who will see their monthly payments fall. A homeowner with a £300,000 tracker mortgage will see monthly repayments drop around £43 from £1,710 to £1,667. It was the first piece of good news in some time for a chancellor, who insists growth is the government’s number one mission.
But Paul Johnson, director of the Institute for Fiscal Studies (IFS), called the downgrade update a “pretty pessimistic forecast”. “The Office of Budget Responsibility (OBR) is generally much more optimistic than the Bank, but if it moves in a similar direction that will spell trouble for the chancellor,” he wrote. In his assessment, Bank governor Andrew Bailey warned that Donald Trump’s threatened US trade tariffs, even if not imposed directly on the UK, could hit growth.
