Bank of England chief economist Huw Pill has warned that interest rates may need to rise over the coming year to keep inflation under control, despite the Bank holding borrowing costs at 3.75% last month.
Speaking to the BBC’s Walescast programme, Pill said the “short answer is yes” when asked whether interest rates would need to increase over the next year.
He said he was concerned that demand in the economy had been running ahead of the UK’s productive capacity, increasing the risk that inflationary pressures could persist.
“I am concerned that we’ve been running the economy a little bit hotter than the supply side,” Pill said.
Pill was one of two members of the Bank’s nine-member Monetary Policy Committee (MPC) to vote for an increase in Bank Rate at its most recent meeting, where the majority opted to leave rates unchanged at 3.75%.
The decision marked the fourth consecutive meeting at which the MPC has kept rates on hold, reflecting the difficult balance between bringing inflation back to target and supporting a slowing economy.
While inflation has eased from recent peaks, it remains above the Bank’s 2% target, with the latest reading at 2.8%.
The MPC’s next interest rate decision is due on 30 July.
