Bank of England’s top economist warns there is ‘some way to go’ on inflation as Huw Pill cools hopes of interest rates being slashed in June – although he says it’s ‘not unreasonable’ to expect cut this summer

The Bank of England‘s top economist today warned there is ‘some way to go’ in keeping inflation under control as he cooled hopes of interest rates being slashed in June.

Huw Pill said it was ‘not unreasonable’ to expect Threadneedle Street to consider cutting interest rates over the summer.

But he added there was ‘still some work to do’ on the cost-of-living crisis.

The Bank’s nine-strong Monetary Policy Committee is due to meet again in June and August after holding interest rates at a 16-year-high of 5.25 per cent this month.

Speaking at an online event organised by the accountancy body ICAEW, Mr Pill said: ‘It’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that bank rate will come under consideration.

‘It’s important to recognise we can cut bank rate, while still leaving some restriction in the system.’

The Bank’s nine-strong Monetary Policy Committee is due to meet again in June and August after holding interest rates at a 16-year-high of 5.25 per cent this month

But Mr Pill also added a note of caution, stressing there is ‘some way to go’ in getting and keeping inflation to the Bank’s 2 per cent target in view of the ongoing strength in wage growth and relative robustness of the jobs market.

He said the Bank would be carefully looking at the upcoming jobs and inflation data before its next rates decision, with the April wages figure key as it will include last month’s near 10 per cent rise in the national living wage.

Mr Pill said the UK jobs market was still tight by historical standards, even though latest official data out today showed the unemployment rate rising to its highest for nearly a year, at 4.3 per cent in the three months to March.

Regular pay growth has proved more stubborn, though, remaining unchanged at 6 per cent, according to the ONS. Most economists had expected a drop to 5.9 per cent.

‘This data has not shifted the dial for UK rate expectations. The market is still expecting the first rate cut to happen either in June or August,’ said Kathleen Brooks, research director at XTB.

‘April´s increase in the minimum wage means that next month´s wage and jobs data could be more useful for the BoE. We also think that CPI data due next week will have a bigger impact on UK rate cut expectations,’ she said.

Money markets continued to price in around a 50 per cent chance of a cut in June, according to LSEG data. They see a 75 per cent chance of a cut in August.

Bank governor Andrew Bailey said last week that a rate cut in June could not be ‘ruled out’, although he stressed it was not a ‘fait accompli’.

Mr Pill last week voted with the majority of the MPC to keep interest rates at 5.25 per cent.