The Bank of England’s chief economist says it’s “not unreasonable” for the central bank to consider cutting the base rate over the summer.
Huw Pill, who is also a member of the Monetary Policy Committee, adds that a summer interest rate cut will “come under consideration,” after admitting that services inflation “seems to have peaked” after falling to 6% from 6.1%, according to the latest official data.
The base rate remains at a 16-year high of 5.25%, as the central bank battles to bring down inflation from 3.2% to its 2% target.
Pill’s online comments to the Institute of Chartered Accountants in England and Wales come as pay rises, excluding bonuses, remained at 6%, according to data from the Office for National Statistics this morning.
Economists had expected pay growth to slow to 5.9% between January and March, while the unemployment rate rose to its highest level for nearly a year to 4.3% over the same period.
Pill points out that wage growth is still “quite well above — given developments in productivity — what would be consistent with the 2% inflation target being met on a lasting and sustainable basis”.
He warns that the fight against inflation still has “some way to go”.
Pill’s comments suggest he may back a rate cut later in the summer, after last week saying a June base rate cut was “ill advised.”
However, following his remarks money market betting shifted to a 53% chance of a rate cut at the BoE’s next meeting in June, up from around 50% at the start of the day.
Pill was in the majority when the committee voted 7-2 to hold last week.
At the following MPC press conference BoE governor Andrew Bailey said a base rate cut next month was possible but not a “fait accompli”.
