Bank of England Chief Economist: Interest Rates Need to Rise Further, Market Pricing 'Not Unreasonable'
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BoE chief economist Huw Pill signaled more rate hikes are coming in 2027, calling market pricing near 5% 'not unreasonable' — the UK tightening cycle is far from over as inflation pressure reshapes the rate path.
Rates at 4% — why isn't that enough?
Pill called last week's 25-basis-point hike to 4% an "important step" but stressed "we have further to go."
His chief concern: "second-round effects" — high energy costs feeding into wages and business pricing, creating a self-reinforcing loop of rising costs.
This means → the BoE is not fighting a one-off energy shock. It is trying to prevent inflation from becoming self-sustaining.
Markets bet on rates near 5% — what does the BoE think?
Market-implied pricing points to UK rates approaching 5% in 2027. Pill called that "not unreasonable."
But he stopped short of endorsing the pricing outright, saying only that "the risks I see will validate some of the tightening priced in."
In plain terms = the BoE did not deny the 5% figure but does not want to lock itself into a specific endpoint either.
What do inflation and growth data point to?
UK inflation stands at 3.5%, well above the 2% target; the BoE expects it to peak at 5% next year.
On growth, Q3 GDP rose 0.7% quarter-on-quarter — stronger than the BoE's summer forecast.
This means → the economy has not slowed under tighter policy. That gives the BoE more room, not less, to keep hiking — growth is holding up while inflation stays hot.
Did the BoE admit it started too late?
Pill acknowledged the BoE "waited too long" to begin raising rates, leaving "less room for a gradual approach."
In plain terms = the window for small, slow steps has closed. Bigger moves are now the default.
He added that while there is "no evidence" of second-round effects yet, "absence of evidence is not evidence of absence" — and he personally leans toward guarding against them early.
What comes next?
The next key date is the December 17 Monetary Policy Committee meeting, where wage and pricing data will shape the pace of hikes.
Pill disclosed he will not seek reappointment when his term expires in September 2027, saying "it is in everyone's interest for a new face to appear."
This reflects a hawkish stance hardening inside the BoE — but policy continuity also faces uncertainty from the coming leadership transition.
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