Market focus on a June base rate cut is “ill advised,” says Bank of England chief economist Huw Pill:  

The Monetary Policy Committee member’s comments come a day after it held base rate at 5.25% for the sixth time in a row — although governor Andrew Bailey said the economy was “moving in the right direction”.     

Pill was in the majority when the committee voted 7-2 to hold the base rate at a 16-year high, as the central bank battles to bring down inflation from 3.2% to its 2% target.      

Financial markets currently price in a 60% chance of a 0.25% rate cut at the body’s 16 June meeting — and a total of two rate cuts in 2024.  

“Focusing just on the next meeting probably is a little bit ill advised,” Pill said in an online presentation to businesses and the BoE’s regional agents.  

The MPC minutes said inflation is expected to return “to around the 2% target” throughout the second quarter, but to increase slightly in the second half of the year to around 2.5%, “owing to the unwinding of energy-related base effects”.    

But Pill told the Bank’s agents: “We shouldn’t be seduced into drawing too much comfort from developments in inflation that are largely driven by factors that are external to us.”  

His comments come a day after governor Bailey said: “We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months.    

“We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.”    

However, Pill added: “We must focus on persistent components of inflation, not the headline rate.  

“The Bank’s medium-term inflation forecasts don’t necessarily give a signal on rate moves at the next meeting, or the one after.”  

Pill pointed out to agents that Bailey, at yesterday’s MPC press conference, said a cut next month was possible but not a “fait accompli”.