BoE’s Pill: Further rate cuts likely to be a gradual process

Bank of England (BoE) Chief Economist Huw Pill commented on the inflation and interest rate outlook during his scheduled appearance on Tuesday.

Key quotes

Still some work to be done on underlying domestic inflation pressure in the UK.

Today's labor data shows pay growth still at high levels.

Further rate cuts likely to be a gradual process.

Shocks to the world economy could knock the UK off lower inflation path.

Underlying economic growth of 0.3% QoQ in the UK is not far off trend growth rate.

Overall picture on fiscal policy is one of consolidation despite short-term boost from budget .

The UK is perhaps less further along with adjustment process towards neutral rates.

Higher neutral rates in the UK is not our base case but something we must consider.

Not surprising that markets are considering possibility of higher neutral rates in UK too.

Market reaction

GBP/USD is finding some comfort from Pill’s commentary, cutting losses while regaining 1.2800. The pair is currently trading at 1.2821.