Recent falls in inflation may have spurred talk of interest rate cuts, but the Bank of England’s deputy governor has said this is not necessarily enough reason to slash rates.
Speaking at the University of Chicago, Huw Pill said it would be better to cut rates too late rather than too early.
He said little had changed with the inflation and interest rate situation since late March, and that there were “greater risks” associated with going too early.
Despite optimism among some, Mr Pill said there is still a “reasonable way to go” before inflation has stabilised to the level needed for the UK to meet its 2% inflation target in a sustainable way.
“This assessment further supports my relatively cautious approach to starting to reduce Bank rate,” he said.
Mr Pill had voted to keep the Bank rate unchanged at 5.25% in the most recent meetings of the Bank’s Monetary Policy Committee in March.
Inflation currently stands at 3.2% – the lowest rate since September 2021.
This is still above the Bank’s target of 2%.
The next Bank rate decision is next week – but markets don’t expect a cut then. June is seen as more likely – though Mr Pill’s comments cast some doubt on that.
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