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The Bank of England will stand firm on the issue of inflation.

TraderKnows
TraderKnows
05-08

Huw Pill, the Bank of England's Chief Economist, stated that even though high interest rates pose a risk of harming the UK economy, the Bank of England will "persevere" in reducing high inflation to the central bank's target of 2%.

On Thursday, Huw Pill, the Chief Economist of the Bank of England, stated that despite the risks of high interest rates damaging the UK economy, the Bank of England will "stick to its guns" and reduce inflation to the bank's target of 2%.

These remarks aimed to reinforce the signals sent by the Bank of England's Monetary Policy Committee (MPC) this month. Pill said that borrowing costs should remain high to suppress "stubborn" core inflation rather than pursuing a rapid decline in broader inflation.

Pill noted in a seminar organized by the South African Reserve Bank that the key task of the Monetary Policy Committee is to ensure that inflation returns to the target level of 2%. The current focus is still to ensure that the Bank takes sufficiently long-term and adequate measures.

At the interest rate meeting held in early August, the Bank of England raised the base interest rate to 5.25% in its fourteenth rate hike. The Bank emphasized at the meeting that to avoid the long-term trouble of high inflation on the UK economy, borrowing costs might remain at a relatively high level for a significant period.

UK Interest Rates and Inflation

Investors believe there is an 80% chance that the Bank of England will raise interest rates to 5.5% next month, and they expect the rate to reach a peak of 5.75% by the end of the year.

Pill emphasized that although the rate hike might damage the growth prospects of the UK economy, the Bank has quite limited room to adjust its policies. Actual data indicates that the stubbornness of some inflation indicators has far exceeded the Bank's previous expectations.

Currently, the Bank of England is closely examining a risk, namely that the linkage between the wage growth of new employees and that of older employees has broken. This phenomenon means that even if the wage growth of new hires decreases, it does not imply that the overall wage growth, which has recently reached historical highs, will soon decelerate.

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The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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Base Rate

The interest rate set by the central bank serves as the foundation for banks and other financial institutions to calculate their own rates and interest.

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