Bank of England chief economist cautions over global economic ‘disturbances’
Huw Pill said the outlook for interest rate cuts depended on there being ‘no big new disturbances to the economy’.
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Your support makes all the difference.The Bank of England’s chief economist has said global economic “disturbances” could affect the path for interest rates cuts after Donald Trump’s victory in the US presidential election.
Huw Pill said policymakers would be able to cut rates more if inflationary pressures continued to ease.
But the outlook depended on there being “no big new disturbances to the economy”, he said, adding that there are “plenty of potential sources of big disturbances”.
His remarks were made a day after the Bank announced it was cutting interest rates from 5% to 4.75%.
Governor Andrew Bailey said this had been possible because inflation had fallen below the Bank’s 2% target, but cautioned that a “gradual approach” to cutting rates would be needed in the future.
This is partly because it needs time to assess the impact of tax rises unveiled in last week’s Budget.
Mr Bailey also stressed the importance of watching out for the “fragmentation of the world economy”, although he refused to speculate over what policies might be introduced by Mr Trump next year.
The president-elect vowed during his campaign to tax all goods imported into the US, saying “tariff” was “the most beautiful word in the dictionary”.
Economists have suggested this could impact the UK by putting pressure on goods prices.
Mr Pill, who is one of the nine members of the Monetary Policy Committee, said the Bank would have to monitor movements in the financial markets in response to global shocks.
He also indicated that it would be necessary for the MPC to look past the temporary inflation hit from the Budget and remain focused on the “underlying and more persistent components of inflation”.
These include price pressures in the services sector and wage growth.