Chief BoE economist: we’ll squeeze economy more to tame inflation

theguardian.com:

The Bank of England will intensify its squeeze on the economy over the coming months as it seeks to bring down the highest inflation rate in 40 years, its chief economist has warned.

Noting that Threadneedle Street was facing its toughest challenge since being granted independence in 1997, Huw Pill said “further work needs to be done” to bring the annual inflation rate back to the government’s 2% target.

Inflation soared to 9% in April as the rising cost of gas and electricity pushed household energy bills to record levels and the escalating cost of food and transport also contributed to the surge in the cost of living.

The Bank’s nine-strong monetary policy committee has raised borrowing costs at its last four meetings but Pill used a speech in Cardiff to signal further increases were needed to prevent high inflation from becoming embedded in the economy.

“In my view, we still have some way to go in our monetary policy tightening, in order to make the return of inflation to target secure,” Pill said.

The Bank’s latest forecasts for the economy envisage the annual inflation rate rising above 10% in the Autumn – a forecast Pill admitted did not make “pretty reading”.

Pill added the impact of high inflation on the poorest households made it all the more important for the Bank to act.

“These are difficult times for many people, especially for the less well off, who spend a higher proportion of their income on energy and food, where recent price rises have been most significant.

“Current challenges are thus a salutary reminder of the importance of price stability as an anchor for wider economic stability, and a bulwark to sustaining people’s livelihoods, especially for those on lower pay and fixed incomes.”

The Bank cut official