BoE's Pill: Structural Changes Leave UK Inflation More Persistent

Bank of England Chief Economist Huw Pill said structural changes in the UK economy have made inflation more persistent, complicating the central bank's path back to its 2% target. Speaking at an event in Tashkent, Uzbekistan, Pill said the economy has become "more prone to this sort of self-sustaining momentum in pricing." He cited changes in labor and goods markets, including those brought by Brexit. Policymakers are still learning and digesting the longer-term effects, he said.

Pill drew a line between temporary inflation shocks and the economy's underlying inflation mechanism. Monetary policy can restrain demand. It has limited ability to address structural supply constraints, he said. Reduced labor mobility and higher trade frictions may have become more entrenched. If so, inflation could fade more slowly after future supply shocks.

The remarks reinforce the Bank's cautious approach. Markets have focused on whether inflation is becoming less responsive to tighter financial conditions. Pill's assessment suggests structural factors may require a restrictive policy stance even when cyclical pressures ease. For GBP/USD traders, the persistence signal means rate-cut expectations may stay subdued.

Pill's comments echo previous observations by Governor Andrew Bailey, who has also acknowledged Brexit's economic consequences and argued for closer ties with the European Union. The message from senior BoE officials is increasingly consistent: structural changes have complicated the task of restoring inflation sustainably to target.