Pill says waiting without seeing is just waiting as he argues for a Bank Rate of 4 percent
The Bank of England’s chief economist told an Edinburgh audience on 3 September that he has voted to raise Bank Rate to 4 percent and set out why he is uncomfortable with the framing his colleagues have used to justify holding it at 3.75 percent. Reprising a line he first used in Washington in March, Huw Pill said that “if you follow a ‘wait-and-see’ approach and then do not ‘see’, all you have done is waited. And in that case, you may have waited too long.”
He was in the minority. At the meeting ending 29 July the Monetary Policy Committee voted 6 to 3 to hold, with Pill, Megan Greene and Catherine Mann all preferring an increase of 25 basis points.
259 days without a change
Bank Rate has stood at 3.75 percent since 18 December 2025, when it was cut from 4.00 percent. By the date of the speech that is 259 days unchanged, on our calculation.
| Bank Rate | Level | Effective |
|---|---|---|
| Current | 3.75% | 18 Dec 2025 |
| Previous | 4.00% | 7 Aug 2025 |
| Before that | 4.25% | 8 May 2025 |
Published rate history. The three most recent levels show an easing cycle that stopped in December 2025 and has not resumed in either direction since.
Inflation has moved in the meantime. The committee cited a June outturn of 2.6 percent when it held in July, and its own inflation page, updated on 19 August, carries 2.9 percent. On those two figures inflation rose 0.3 percentage points between the decision and the speech, on our calculation, and sits 0.9 points above the 2 percent target.
A new measure, and what it says in both directions
Pill built his case on a measure staff introduced in Box C of the July Monetary Policy Report, which he called “sticky-central inflation”. It reweights the consumer price index towards components whose prices have historically proved stickier and towards sectors most central to the economy’s production network, on the reasoning that inflation in flexible price sectors reflects efficient relative price changes a central bank should look through, while network central prices such as energy raise marginal costs across many sectors at once.
The measure cuts both ways, and he says so. On the historical series he called it “reassuring”, noting that it demonstrates disinflation towards the 2 percent target after the 2022 and 2023 episode, albeit with some stalling from mid 2024, and that the most recent data show “a healthy step down towards target” even as the headline stays higher. That, he said, is consistent with a large part of the recent rise in headline inflation being something the committee can look through.
The warning is in the projection rather than the history. Carried forward on an unchanged Bank Rate of 3.75 percent, he said headline inflation falls back towards target in 2027 while the underlying measure remains stuck meaningfully above 2 percent, with the risks around that projection clearly to the upside.
No numerical value for the measure is published in the speech, and the charts carry no data tables, so the assessment is directional rather than quantified.
Why he will not fine tune
He distinguished two uncertainties. Energy prices he described as closer to Knightian uncertainty than to conventional risk, meaning outcomes to which statistical probabilities cannot be assigned, and he drew the policy conclusion directly: “By nature, something that is ‘unknowable’ cannot be ‘learnable’.” Conditioning policy on high frequency energy price movements, he argued, mistakes noise for signal.
The propagation of that shock is the part he treats as learnable, and the part that worries him. He said he is convinced there has been no de anchoring of longer term inflation expectations, which would have shown up quickly in indexed swaps or survey measures, and added that this “has never been my main concern”. The concern instead is what he called catch up dynamics, and he named three structural reasons he thinks Britain is more exposed to them than standard models allow: lower contestability of markets following Brexit, lower trend productivity since the financial crisis, and lower participation and productivity among young workers since the pandemic.
The scenario problem, and wrong way risk
The April Monetary Policy Report published three scenarios without identifying a baseline. Running them through a scenario synthesis produced a distribution for Bank Rate one year ahead with two peaks: one implying little need to move from 3.75 percent, the other implying a rise towards around 5 percent. He does not put a figure on the gap between them beyond that description.
Pill’s objection is that such a distribution invites markets to price an unchanged base case and push the tightening into a premium that steepens the money market curve. The July report reinstated a baseline and produced a single peaked distribution with a higher mean and mode.
From that he draws what he calls wrong way risk. If the committee relies on the curve rather than on Bank Rate, then at some point it must either validate the curve by raising or acquiesce in it falling. In that setting, he said, “the market will ease financial conditions just when the MPC needs them to tighten”, and conditional messages about acting only in extreme circumstances risk being treated as “cheap talk”.
Why it matters: A chief economist publicly setting out why he is uncomfortable with the framing behind his own committee’s majority decision, two weeks before that committee meets again, is a communication event as much as an economic one, and Pill’s argument is precisely that communication is the mechanism. He is careful to say the disagreement is a feature of the system rather than a flaw in it, and he closes by saying he is sure the committee will deliver. His claim is that a held rate reads as a status quo bias, that the bias feeds market expectations, and that those expectations then feed back into the decision, which is why he wants the committee to anchor the short end rather than track it. The substantive disagreement is narrower than the rhetoric suggests: he is not forecasting a different headline path, he accepts inflation expectations are anchored, and he says explicitly that raising rates “need not be the start of a prolonged and aggressive series of increases”. What separates him from the majority is a judgement about second round effects that he concedes cannot be settled with current evidence, saying it “remains much too early to tell” and that definitive evidence will not arrive soon.
Outlook: The committee announces again on 17 September, and the question is whether the minority grows from 3. Pill has now put a specific analytical framework behind the dissent rather than a preference, which makes the July Monetary Policy Report box the thing to read before that meeting, since the projection it supports is the one that keeps underlying inflation above target through 2027 on an unchanged rate. Watch the August inflation print against the 2.9 percent currently carried, because his own case rests on headline inflation falling while underlying pressure does not, and a headline that falls on schedule would strengthen the majority’s position while leaving his argument intact. The scenario presentation is the second thing to follow, given that the July report moved from three scenarios without a baseline to a baseline with scenarios around it, which is the change he credits with producing a better anchored distribution.
Sources: Bank of England.
