Sharp Slide in UK Inflation is Expected – BoE Chief Economist Huw Pill

It was a quiet day for the GBP/USD, with no UK economic indicators to provide the Pound with direction.

However, while there were no stats to consider, Bank of England Chief Economist Huw Pill was in the spotlight. Huw Pill was a panelist at the Institute of Chartered Accounts in England and Wales – UK Regions Economic Summit.

Huw Pill Delivers Inflation Relief but Only in H2 2023

With inflation still the hot topic for central banks and the global financial markets, Huw Pill said,

“Inflation is expected to fall rapidly in H2 2023.”

Despite concerns over the fresh wave of COVID-19 cases in China and the ongoing war in Ukraine, Pill also noted that supply chain constraints are improving, supporting the inflation outlook for the second half of next year.

However, the BoE Chief Economist said wage growth is inconsistent with the Bank’s 2% inflation target.

Wage growth has been a focal point for BoE Monetary Policy Committee members.

In the summer, Huw Pill warned that the Bank would take more aggressive steps to tackle inflation if there were signs of a wage-price spiral taking hold or if companies continued to raise their prices.

Talking to Bloomberg TV, Pill had said,

“If we see greater evidence that the current high level of inflation is becoming embedded in pricing behavior by firms, in wage-setting behavior by firms and workers, then that will be the trigger for this more aggressive action.”

However, today’s comments will likely provide some relief, with more aggressive BoE policy moves likely to send the UK economy into a lengthier recession. Following the November rate hike, the Bank forecasted the UK economy to contract in five out of six quarters should the Bank stand pat on borrowing costs.

The Pound Ignores Inflation Outlook Ahead of Powell Speech

The GBP/USD returned to $1.20 levels this morning despite Huw Pill’s comments.

This morning, the Pound was up 0.41% to $1.20004 against the Greenback. The Pound recovered from a pre-speech and current-day low of $1.19421.

Up Next

While Bank of England chatter failed to influence the GBP/USD this morning, the US economic calendar will impact the GBP/USD pair.

ADP Nonfarm Employment, JOLTs Job Openings, and Q3 GDP numbers will draw interest. However, late in the US session, Fed Chair Powell’s speech will likely be the main event. Investors will look for hints on when the Fed will pivot from its aggressive policy moves.