By David Milliken
LONDON (Reuters) -Bank of England Chief Economist Huw Pill said not too much should be read into a shift in language in November’s Monetary Policy Report and that the central bank’s rate decisions were finely balanced.
On Thursday, the BoE’s main summary of its monetary policy decision no longer included the words “and careful” alongside “gradual” when it said that its Bank Rate “is likely to continue on a gradual downward path”.
Asked about this at a briefing for businesses on Friday, Pill said: “I would caution a little against over-interpreting these linguistic changes.”
“Perhaps in some circles, ‘gradual and careful’ had become associated with a certain pace and magnitude of Bank Rate reduction and I think it’s probably fair to say that the committee as a whole never really endorsed that,” he added.
Pill was part of the 5-4 majority that voted to keep Bank Rate unchanged at 4% on Thursday. Before Thursday’s decision to keep rates on hold, the BoE had cut interest rates every three months since the start of its cutting cycle in August 2024.
Previously, Pill had made the case for a slower or “cautious” approach to rate cuts.
Pill said BoE policymakers were divided between one group, who viewed slower business activity and falling employment as likely to push inflation below target over the medium term, and another which was more concerned that inflation and wage growth had not yet slowed that much despite a weaker economy.
“If you look at the vote which was a 5-4 vote on this occasion to hold Bank Rate, I think that says that the balancing of those to risks is quite finely balanced at the moment,” he said.
Financial markets price in a roughly 60% chance of a quarter-point rate cut on December 18 after the BoE’s next meeting.
(Reporting by David Milliken; Editing by Alistair Smout)
