MNI BRIEF: Doubtful To Some Quarterly Cuts Justified- BOE Pill

A key feature of the Bank of England Monetary Policy Committee's August projections was that inflation risks shifted to the upside and this raised doubts to some over whether it was justifiable to cut the policy rate once a quarter, BOE Chief Economist Huw Pill said at an agency briefing. (see MNI BOE WATCH: Fractured MPC Delivers 25 bps Cut On 2nd Vote  )

Pill was one of four members on the nine strong committee who voted for unchanged policy, and while the MPC has stuck to the line that cautious. The BOE's August analysis showed "some shift in the balance of risks to inflation at the .. two to three year horizon towards the upside" and one relatively benign story behind this was due to temporary factors, including higher food prices and tax increases, Pill said.

Another view is that higher food prices will fuel inflation expectations and changes in price and wage setting behaviour and "that might lead us ... to question whether the pace at which we were reducing Bank Rate over the last year, a pace of one quarter point cut every quarter, is ... sustainable," Pill said