Huw Pill’s remarks in an interview with the Financial Times will likely be seen as the latest evidence of Britain’s cost of living crisis.
Mr Pill also told the FT that the bank would face a ‘live’ decision whether or not to raise interest rates at its rate-setting meeting next month, though he declined to say to. which way he would vote.
What follows recent remarks by Mr Pill’s boss, BoE Governor Andrew Bailey, that the Bank may ‘have to act’ on inflation – comments that prompted markets to estimate a 90% chance of a rate hike in November.
The bank rate is currently at an all-time low of 0.1% after being cut at the start of the coronavirus crisis.
Inflation has increased in recent months as supply chains struggle to keep up with the recovery in demand after pandemic lockdowns.
Although the latest official figures have shown the rate of price increase move back slightly At 3.1% in September, underlying pressures – including labor shortages and soaring energy prices – are expected to persist.
The Bank of England has previously said it expects the CPI measure of inflation to exceed 4% by the end of the year.
Mr Pill told the FT: “I wouldn’t be shocked – let’s put it that way – if we saw an impression of inflation near or above 5%. [in the months ahead]. »
He said it was “a very uncomfortable place” for a central bank with an inflation target of 2% – despite his view that inflation was likely to come back down in the second half of next year.
However, he urged caution about the exact timing of a rate hike – traditionally seen as a tool for central bankers to try to control inflation – telling the FT that “there may be a little too much excitement in the focus on rates right now ”.
Mr Pill’s final remarks come after he recently warned that the “size and duration” of the recent inflation pickup has turned out to be larger than expected.