rates will come down, but only with progress on inflation

The Bank of England’s (BoE) Chief Economist and Executive Director for Monetary Analysis Huw Pill hit newswires on Monday with a measured tone, noting that while interest rates are overwhelmingly pointed down looking forward, rate cut expectations might be somewhat premature as the BoE looks for firmer evidence that UK inflation will continue to recede in the coming months.

Key highlights

• February would have been far too premature of a rate cut.
• BoE’s Pill is not yet confident that inflation is low enough to immediately reduce rates.
• BoE rates will only decline as long as progress continues with inflation.
• Rates will remain restrictive even after initial cuts.
• It’s still too early to declare inflation fully suppressed, still more work to be done.
• BoE’s Pill sees a slight uptick in UK Gross Domestic Product (GDP).
• Overall growth remains limited by supply constraints.
• UK activity remains overall quite weak.