We’re not ‘inflation nutters,’ top Bank of England economist says

The Bank of England accepted a number of gilts in the back market on Wednesday.

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LONDON – Bank of England policymakers are not “inflationary” but tightening monetary policy is necessary to prevent inflation from seeping into the economy, central bank chief economist Huw Pill said on Tuesday.

The Bank’s monetary policy committee raised interest rates by 75 basis points last week, its biggest increase since 1989, despite warnings that the British economy is facing the longest recession on record.

“We do not intend to be inflationary. We intend to manage this trade in a way that avoids unnecessary, useless and perhaps, the cessation of the real economy,” Pill said at a conference organized by Swiss banks. UBS.

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As part of its announcement last week, the Bank took the unusual step of challenging market prices for future interest rate increases, suggesting prices will be below market expectations.

Pill said he is “doubtful” that further increases will help temper expectations and create a “negative spread” without real economic value. The Bank of England has come under criticism for being slow to cut rates in its efforts to recover from skyrocketing rates.

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“I think, unfortunately, it is the case that the Phillips curve has not ended. There is a debate about what the slope of the Phillips curve is and how that is changing, but the Phillips curve has not ended, and the exhaustion of Phillips. Wealth and increase is to some extent, an important part of the reduction you want to see,” he said.

The Phillips curve is an economic theory that argues that inflation and unemployment have an inverse relationship.

Pill stressed that the UK’s current economic downturn is not solely due to monetary policy, with external factors such as rising energy costs putting a strain on household incomes.

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“I think there’s a risk, which we know, that we and the Bank of England and the MPC will be blamed for the recession. The recession was really driven by other forces, and we’re trying to manage change.” and other soldiers,” said Pil.

“One of the reasons for the independence of the central bank is that we don’t have to be popular. We can still make the right decisions. I think making the right decisions is what our goal should be.”

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