BoE Pill: We’ve had a series of transitory inflation shocks one after the other

In an interview on the “Beyond Unprecedented” podcast produced by Columbia University’s law school, BoE Chief Economist Huw Pill reiterated the central bank’s official forecast, stating that some factors maintaining high inflation are likely to recede in the upcoming months and that inflation could fall below the 2% target in the next few years.

Discussing the continuous inflationary shocks faced by the UK, Pill said, “We’ve had a series of inflation shocks that just come one after the other.” He added, “Each of those shocks was in itself transitory, but they just were timed in a way that inflation never dissipated.”

Pill emphasized the need for UK citizens to accept being worse off and to refrain from trying to maintain their real spending power by driving up prices through higher wages or passing on energy costs to customers. Pill observed, “What we’re facing now is that reluctance to accept that, yes, we’re all worse off and have to take our share.”

He also highlighted the UK’s status as a major net importer of natural gas and the resulting challenges, noting, “The UK, which is a big net importer of natural gas, is facing a situation that the price of what you’re buying from the rest of the world has gone up a lot, relative to the price of what you’re selling to the rest of the world, which is mainly services in the case of the UK.”

Pill concluded, “If what you’re buying has gone up a lot relative to what you’re selling, you’re going to be worse off.”