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The Bank of England has warned Kwarsi Kwarteng’s mini-budget, which saw the pound plummet to a record low against the dollar, will require “a significant monetary policy response”. Chief economist Huw Pill reasserted the Bank of England’s willingness to act quickly to bring inflation under control. Huw Pill told the International Monetary Policy Forum: “I think it’s hard not to draw the conclusion that all this will require a significant monetary policy response. Let me leave it there.”
He warned of “challenging times” ahead to return inflation back to the BoE’s target of two percent target.
The bank’s chief economist added market conditions over recent days and weeks have created “additional challenges”.
Mr Pill, who has been the BoE’s chief economist since September 2021, has consistently voted in line with Governor Andrew Bailey and the Monetary Policy Committee as a whole on their decisions over interest rates.
There was panic yesterday after the pound slumped to a record low against the US dollar after Mr Kwarteng announced a raft of tax cuts in his mini-budget on Friday.
Last week, the BoE raised interest rates by 0.5 percent to 2.25 percent, but there are now fears this will have to be hiked much higher.
The BoE has been urged to take quick action and yesterday hinted at another rise in interest rates while the Government presses ahead with its plan to cut taxes.
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