(Reuters) -Bank of England Chief Economist Huw Pill said it had to hold firm in its battle against inflation and it cannot afford to loosen tight monetary policy, the Financial Times reported on Friday.
Pill said that the economy was seeing slow growth in activity and unemployment but that was largely supply-driven and not associated with the easing of inflationary pressures.
He said that headline inflation had come down, which was largely "exogenously driven" as energy, food and international goods prices had stabilised, but the bank still needed to focus on bringing domestically generated inflation down.
"Despite the fact that activity has weakened in our forecast relative to what we anticipated, if you look at those key indicators of the persistent domestic underlying components of inflation (namely services price inflation and pay growth), those things have remained stubbornly high through the summer," Pill told the FT in an interview
"Indeed, even in the most recent data, although both have shown a small — but welcome — sign of falling, they remain at very elevated levels," he said, referring to domestic price inflation and pay growth.
Pill said that the challenge for the bank was to bring down the components of inflation that have remained high.
Earlier this month, Pill had said it was "not totally unreasonable" to think about a rate cut around August 2024 which was priced into the market at the time.
Economists polled by Reuters earlier this month expected the BoE will keep its Bank Rate at a 15-year high of 5.25% until at least July, but participants said the bigger risk for the first cut was that it comes later than they expected.