Inflation in the UK could rise to 5% or above over the next few months, according to the Bank of England‘s new chief economist.
Huw Pill, who replaced Andy Haldane in September, told the Financial Times in an interview that the central bank would face a “live” decision on whether to raise interest rates at its next rate-setting meeting on 4 November and that the Bank’s policy committee was “finely balanced” on the matter.
Analysts are forecasting a rate hike in November after BoE governor Andrew Bailey said the central bank may “have to act” over inflation.
Inflation was 3.1% in September, slipping back slightly despite soaring petrol prices and labour shortages.
The central bank rate is at an historic low of 0.1% after it was cut in the early stages of the COVID-19 pandemic.
The Bank of England has previously said it expects CPI inflation to rise above 4% by the end of this year.
“I would not be shocked – let’s put it that way – if we see an inflation print close to or above 5% [in the months ahead],” Pill told the FT.
“And that’s a very uncomfortable place for a central bank with an inflation target of 2% to be.”
Pill believes prices will rise sharply heading into next year and then expects inflation to fall in the second half of 2022.
