Bank of England Chief Economist Huw Pill said Tuesday that he could not be sure that there had been structural changes in the UK economy that were resulting in more persistent inflation, but he noted that while the labour market is easing some "key indicators of pay dynamics remain quite strong."
Pill said "I do worry about the fact that inflation has stayed stubbornly high, and ... pay dynamics have stayed stubbornly strong even as activity has been relatively disappointing," and that this was influencing his policy voting, as he was in the minority of two who voted against the 25bps cut in May.
He said policymakers should not just assume inflation shocks would "disappear quickly and painlessly". Pill noted that as he had voted against the May cut that entailed that something would have to indicate that there's less persistence in inflation for him to believe that "the pace of removal of restriction can be accelerated relative to what I've expected in the past," - a suggestion he could oppose a further cut in the near term even though he said at the event that he did not support a halt to easing.
