Huw Pill Interest Rate Forecast sharpened on the Bank of England’s next move after the chief economist said interest rates will probably need to rise next month and again in early 2027. He said the latest move to 4% was a significant step, but added: “We have further to go.”
Huw Pill and the Bank
Pill signaled that he may vote for another quarter-point increase next month, keeping the focus on the MPC’s meeting and on how quickly the Bank of England is willing to move again. His view is that the central bank will have to do what is necessary to get inflation back to 2% through time.
Speaking to the Financial Times, he said: “My view would be, we will see evidence that motivates further rises.” He also said: “My bias, for what it’s worth, is that I worry about the inflationary impact being magnified by second-round effects.”
UK households and refinancing
The impact is not abstract. An estimated 2.3 million homeowners will have to refinance their loans next year, leaving them exposed to higher borrowing costs if the Bank follows through on the path Pill described.
That pressure comes after the Bank of England increased rates from 3.75% to 4% earlier this month. Pill said the decision to lift rates was significant, and he added: “In my view, we waited too long.”
Markets are already looking further ahead. Pill said financial markets expect UK interest rates to rise to almost 5% in 2027, and he called that expectation “not outrageous.”
Inflation and the next vote
The next driver is inflation itself. Pill said he considered an end to the US-Israeli conflict with Iran and a fall in energy prices to be a very low probability, while inflation is expected to rise to 5% in spring next year.
The reader-facing question now is how large the next move will be and how fast the Bank moves after that. For households refinancing next year, the immediate issue is whether next month’s MPC meeting opens the door to another quarter-point rise, with a further increase still on Pill’s path for early 2027.
