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

Bank of England policymakers are not “inflation nutters” but tightening of monetary policy is necessary to prevent surging prices becoming entrenched in the economy, the central bank’s Chief Economist Huw Pill said Tuesday.

The Bank’s Monetary Policy Committee raised interest rates by 75 basis points last week, its largest hike since 1989, despite warning that the British economy is facing its longest recession since records began.

“We’re not meant to be inflation nutters. We are meant to sort of manage this trade-off in a way that avoids unnecessary, counterproductive maybe, disruptions to the real economy,” Pill said at a conference organized by Swiss bank UBS.

Alongside its policy announcement last week, the Bank took the unusual step of challenging the market’s pricing for future interest rate hikes, suggesting the terminal rate will likely be below market expectations.

Pill said he was “skeptical” that front-loading rate hikes would help to temper expectations and produce an “immaculate disinflation” without any real cost to the economy. The Bank of England has come under criticism for being too slow off the mark in its efforts to rein in sky-high inflation.

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