UK can’t say ‘job done’ on fighting inflation, says Bank of England’s Huw Pill | Inflation

The Bank of England is not in a position to declare “job done” in tackling inflation amid concerns over rising prices hitting households, Threadneedle Street’s chief economist, Huw Pill, has said.

Speaking a day after the central bank cut interest rates and slashed its growth forecasts for 2025, Pill warned that a “cautious” approach to further interest rate reductions would be required as inflation pressures remained.

Highlighting resilience in average wage growth, he said there were signs that price pressures were not coming out of the economy as much as the Bank had hoped late last year.

“That means that we’re not in a situation where we can declare job done,” he said, speaking at a National MPC Agency briefing. “I think that is a reason for caution, for carefulness in the way we proceed with removing monetary policy restriction and cutting bank rate.”

The Bank warned on Thursday that UK households would face a fresh squeeze on living standards from rising inflation even as the economy stalled, after announcing a quarter-point reduction in its key base rate to 4.5%.

Inflation has fallen from a peak of more than 11% in the second half of 2022to 2.5% in December 2024, still above the Bank’s 2% target. However, it is expected to reach a fresh peak of 3.7% this autumn as households come under pressure from rising energy prices.

Wholesale energy costs have risen sharply in recent months because of a colder than expected winter in Europe. The Bank said regulated utility prices and government policies were also adding about 0.5 percentage points to headline inflation – including a rise in water bills, lifting the cap on bus fares and introducing VAT on private school fees.

Pill voted with the majority of the Bank’s monetary policy committee as it pushed through the third cut in borrowing costs in six months. However, his call for “caution” highlights a subtle difference from the language agreed by the nine-member panel, for “gradual and careful” interest rate cuts.

Warning that inflationary risks remained, he added: “Our base case is that blip probably will not have second round effects. But there are risks to both sides and that’s something we have to remain quite vigilant about.”