The Bank of England will probably need to raise interest rates further in 2027, on top of an increase expected at its December meeting, chief economist Huw Pill has told the Financial Times, in the clearest signal yet that the Bank’s tightening cycle is far from over.
Pill said November’s rise to 4% — the first increase since August 2023 — was a “significant step” towards getting monetary policy into a better place, but added: “we have further to go.” He told the newspaper he expected evidence to emerge that “motivates further rises” next year, driven by second-round effects from elevated energy costs. “We will do what is necessary to get inflation back to 2% through time,” he said.
The Bank expects inflation, pushed up by second-round wage effects linked to the Iran war, to reach around 5% in the middle of next year — more than double its 2% target. Pill put the chance of an end to the US-Israeli conflict with Iran and a fall in energy prices at “very low probability”, the FT reported, signalling he is set to vote for another quarter-point rise next month.
Markets currently price in about 90 basis points of tightening by the end of 2027, which would take Bank Rate close to 5%. Pill described those expectations as “not outrageous”. He also said the Bank should have acted sooner against inflation. “In my view, we waited too long,” he said, adding that the delay meant “the ability to be modest [in the scale of rate rises] has diminished.”
Pill also signalled he will not seek a third term as chief economist when his current term ends in September 2027. He has held the post since September 2021 and sits on the rate-setting Monetary Policy Committee.
Note: this report is based on Reuters’ account of the Financial Times interview, published on Saturday.
Sources: Reuters, “BOE likely to raise rates further in 2027, Pill tells FT” (https://www.reuters.com/world/uk/boe-likely-raise-rates-further-2027-pill-tells-ft-2026-11-14/); Financial Times interview with Huw Pill, as reported by Reuters; Bank of England, Huw Pill biography (https://www.bankofengland.co.uk/about/people/huw-pill/biography).
