Bank of England Chief Economist Huw Pill said central banks must remain firmly focused on tackling inflation amid rising bond yields in financial markets worldwide, Reuters reported.
Pill said inflationary pressures remained a concern and monetary policy needed to stay focused on bringing them under control. He also stressed the importance of ensuring the financial system continued to function effectively so that monetary policy could be transmitted to the broader economy.
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The comments come as the Bank of England’s Monetary Policy Committee (MPC) remains divided over the interest-rate outlook. Pill and two other MPC members voted to raise rates in September, while a majority preferred to keep them unchanged as they assessed the inflationary impact of the war in Iran.
However, Governor Andrew Bailey and other policymakers have indicated that the time for an interest rate hike could be approaching, keeping the outlook for UK monetary policy uncertain.
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Rising global bond yields have added to the challenges facing central banks as they seek to contain inflation without placing excessive pressure on economic growth. Higher borrowing costs in financial markets can tighten financial conditions even without an immediate change in official interest rates, potentially affecting household spending, business investment and credit demand.
For the Bank of England, the key challenge is assessing whether inflationary pressures will persist and require further monetary tightening. Policymakers are also monitoring the impact of the Iran war on energy prices and the broader inflation outlook. The MPC's differing views highlight the uncertainty surrounding the timing and scale of any future rate increases.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times.)
