By Paul Hannon
The Bank of England shouldn't allow uncertainty to delay efforts to contain a rise in inflation as energy prices surge in the aftermath of the attacks on Iran by the U.S. and Israel, Chief Economist Huw Pill said Tuesday.
The U.K.'s central bank last week left its key rate unchanged at 3.75%, having been expected to cut before the attacks. It said the annual rate of inflation would likely rise to between 3% and 3.5% over coming quarters, well above its 2% target.
"I stand ready to act to contain the lasting components of any new inflationary pressures," Pill said in a speech delivered in North Macedonia. "The fog of uncertainty in which we always operate cannot be an excuse for inaction."
Pill's comments suggest he might be prepared to vote for a rate rise as early as April 30, when the Monetary Policy Committee next meets to set policy.
Pill has long voted for higher borrowing costs than many of his fellow rate setters, arguing that wages are likely to rise too rapidly to ensure inflation settles at the central bank's 2% target, despite a cooling jobs market.
In his speech, Pill said a "structural change" in the way wages and prices are set might ensure that "persistence in the current episode may again be greater than implied by our standard models."
"I see the upside risks to price stability mounting as a result of events in the Gulf," he said.
The U.K.'s unemployment rate has risen over recent months, and economists expect it to increase further as growth slows in response to higher energy costs and the uncertainty caused by the war.
The U.K.'s purchasing managers index released earlier Tuesday recorded a slowing of business activity to its weakest pace in six months during March, and a further loss of jobs.
Investor expectations of future BOE policy have changed dramatically since the outbreak of the conflict. Prior to the attacks on Iran, two rate cuts delivering an aggregate reduction of half a percentage point were expected for this year.
In recent days, investors have moved to expect as many as three rate rises for an aggregate of three-quarters of a percentage point.
That total swing of more than a percentage point has contributed to a sharp fall in government bond prices, and a rise in yields that has already help pushed mortgage rates higher.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
March 24, 2026 10:25 ET (14:25 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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