Huw Pill: The economic situation and monetary policy

Speech by Mr Huw Pill, Chief Economist and Executive Director for Monetary Analysis of the Bank of Englandat the Association of Chartered Certified Accountants (ACCA) Cymru Wales, Cardiff, 20 May 2022. 

Central bank speech  | 
23 May 2022

Good morning everyone.

It is a great pleasure to speak here in Cardiff this morning.

Thanks are due to: Lloyd Powell, Head of the Association of Chartered Certified Accountants (ACCA) Cymru Wales, for the invitation to speak here today; to Steve Hicks and Ian Derrick – the Bank's Agents in Wales – for organising a fantastic visit, of which this is one of the highlights; and of course to all of you for coming this morning at what I am sure are busy and challenging times.

On Wednesday, we learnt that UK consumer price inflation currently stands at 9.0%. The MPC forecasts that it will rise to double digits in the fourth quarter of this year. For a monetary policy maker charged with achieving an inflation target of 2%, this is obviously a very uncomfortable situation.

But, of course, my discomfort as an MPC member in these circumstances is as nothing to the challenges facing those most directly exposed to the current cost of living crisis. These are difficult times for many people, especially for the less well off, who spend a higher proportion of their income on energy and food, where recent price rises have been most significant.

Current challenges are thus a salutary reminder of the importance of price stability as an anchor for wider economic stability, and a bulwark to sustaining people's livelihoods, especially for those on lower pay and fixed incomes.

Acting to achieve the MPC's 2% inflation target is therefore now more important than ever.

In today's remarks, I will outline how I view the current economic situation and how I believe monetary policy needs to evolve to bring inflation back to target.

I hope to offer an honest, clear and frank view about the challenges the MPC faces, and how we are dealing with them.