BOE: Pill: Scope to lower rates not as big as weakness in demand alone suggests

Pill asked why the Bank would leave rates on hold when the economy looks so weak.
He says (see the bottom quote) that "I think the scope to lower rates, while the remaining consistent with our 2% inflation targets, given where we're starting from, is perhaps not as big as the question suggested. "

• He notes that inflation can be driven by external factors and says: "If we weren't targeting a meaningful measure of prices that was actually influencing firms decisions in people's lives, I think we would quickly lose the logistics and legitimacy we enjoy in terms of pursuing our inflation target, so we don't get to choose that when inflation is high because of these external forces that we do need to weigh against the possibility that that can lead to changes in price setting behaviour and other cost dynamics domestically that might perpetuate inflation even as those external forces begin to drop out, we need to lean against these famous second round effects that can generate more persistence in in UK inflation."
• Says that supply-side is equally important, that productivity is weak: "So I think it's exactly trying to work out where demand stands relative to supply. That's a key element of what the MPC is trying to do."
• "We do believe... perhaps particularly focused on the labour market, but also to some extent, looking at the broader market for goods and services here in the UK, then we do believe some slack has emerged. So we do believe demand in aggregate terms, is somewhat below the supply potential of the UK economy, but I think that gap is uncertain in magnitude, and at least in our baseline forecast, it's a gap that continues to open up for a few quarters, but then towards the end of our forecast horizon begins to narrow again.
• "So from that perspective, I think the scope to lower rates, while the remaining consistent with our 2% inflation targets, given where we're starting from, is perhaps not as big as the question suggested. "