LONDON — The Bank of England will probably need to raise interest rates again in December and in early 2027 to fight rising inflation, chief economist Huw Pill said in an interview with the Financial Times, the Guardian reported Saturday, Nov. 14.[1]
Related: Fed’s Williams and Hammack Signal More Rate Hikes Ahead of the December Meeting.
What Pill said
The Bank recently raised its rate to 4% from 3.75%. Pill called that a significant step but said “we have further to go.”[1] He said he worries the inflation hit from energy prices will be magnified as workers push for higher pay, and that the Bank waited too long to act.[1]
Pill described an end to the U.S.-Israeli war with Iran and a fall in energy prices as a very low probability, signaling he is ready to vote for another quarter-point increase next month.[1] He said market expectations of rates near 5% in 2027 were reasonable.[1]
The economy behind it
Britain’s economy grew 0.7% in the third quarter, and only the U.S. grew faster among G7 countries on an annual basis. Inflation is expected to rise to 5% next spring, driven by oil and gas prices tied to the Iran war.[1]
Not everyone agrees the economy is strong enough. Some economists worry further increases will hurt manufacturing and construction, which has contracted for much of the year.[1]
Who pays
About 2.3 million homeowners must refinance mortgages next year. Households also face a higher energy price cap of almost £2,000 a year for a typical home and council tax bills up nearly 5%.[1]
Our Take
Central banks on both sides of the Atlantic are now talking about raising rates, not cutting them, as the Iran war keeps energy expensive. That is a sharp turn for borrowers. In the U.S., wholesale prices are rising 6.5% a year, even as the IEA sees an oil surplus. More in business news.
Sources
Read next in Economics
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