Bank of England’s Economist Warns Against Rapid Rate Cuts

The Bank of England’s chief economist, Huw Pill, has raised concerns over the pace of recent interest rate cuts, warning that they may have been “too rapid.” Despite inflation showing signs of decline, Pill, who voted against the recent quarter-point reduction, argued that inflationary pressures are still present. He pointed out that pay growth remains slow to decrease, household inflation expectations are rising, and core services inflation persists. Pill emphasized the need for a more measured approach to ensure that inflation returns to the target of 2% in a sustainable manner.

Pill’s warning comes as the central bank has been actively reducing rates since August 2024 in response to inflation, but the chief economist believes that further cuts may not be the best solution. Rather than halting rate reductions altogether, he suggests that a pause might be the most prudent course of action. This caution reflects his belief that a more gradual approach is necessary to ensure that inflation does not rebound and remains on track toward the long-term target.

With inflationary pressures still looming, Pill’s comments have sparked a debate within the economic community regarding the effectiveness of the Bank of England’s current monetary policy. While some may argue that rate cuts are essential to stimulate economic growth, others share Pill’s concern that such rapid reductions could undermine efforts to bring inflation under control. The Bank of England’s next steps will likely play a crucial role in shaping the UK’s economic trajectory in the coming months.