BoE’s Pill: Cannot say now if rate rise would only be temporary
By Agustin Wazne
Updated: 14 May 2026
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Bank of England (BoE) MPC member, Huw Pill, said that he does not expect second-round effects to be as strong as in 2022, and also that the second-round effects are behavioral, affected by what the BoE does next. He spoke at an event hosted by NatWest on Thursday.
Bank of England (BoE) MPC member, Huw Pill, said that he does not expect second-round effects to be as strong as in 2022, and also that the second-round effects are behavioral, affected by what the BoE does next. He spoke at an event hosted by NatWest on Thursday.
Key quotes:
We must not allow ourselves to drift off into deep space of unmoored inflation dynamics.
I do not expect 2nd round effects to be as strong as in 2022.
Labour market weakness means second round effects likely to be weaker than in 2022.
Latest GDP data shows some robustness.
Not clear labour market is as loose as when there were oil price spikes in 2008 or 2011.
Tighter financial conditions do not get BoE out of question of whether to raise rates itself.
Prompt but modest increase in rates advantageous.
Second-round effects are behavioural, affected by what BoE does.
If you wait until market forces you to move, that would be more challenging to BoE.
Cannot say now if rate rise would only be temporary or a plateau for rates.
Fiscal and global situation are influencing long-term market rates as well as inflation outlook.”
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
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