Bank of England (BoE) Chief Economist Huw Pill said on Wednesday that he is a bit more sceptical about market pricing of four rate hikes over the next year. Pill added that UK output and labor market have proven more resilient.

Key quotes

I am a bit more sceptical about market pricing of four rate hikes over the next year.

UK output and labor market have proven more resilient.

Better forecasts still not showing runaway growth rates. 

Even if AI boosts the supply side, it will take time to feed in. 

Underlying UK inflation never fell enough pre-Iran shock.

Early move would’ve shown BoE wasn’t ‘holding and hoping”.

It’s misguided to say we shouldn’t be reacting to uncertainty. 

To get to 100bps we’d need more concrete evidence of risk. 

Market reaction

At the press time, the GBP/USD pair is up 0.07% on the day to trade at 1.3264.

BoE’s Pill questions market’s aggressive rate hike path

FXS Speechtracker scores the speech at 7/10, slightly below the speaker’s 7.4/10 historic average, pointing to a tone that is firm but not exceptionally hawkish. Pill’s scepticism about market pricing of four hikes, emphasis on resilient UK output and labor markets, and acknowledgement that better forecasts still do not show runaway growth collectively signal a cautious, mildly hawkish stance rather than a full endorsement of aggressive tightening.

Comments that an earlier move would have shown the BOE was not “holding and hoping,” and that it is misguided not to react to uncertainty, reinforce a bias toward maintaining a tightening option while demanding more concrete evidence before moving to 100bps of hikes. The reference to underlying UK inflation not having fallen enough before the Iran shock, and the view that any AI-driven supply boost will take time, support the idea that UK rates are likely to stay elevated, which is modestly supportive for the Pound versus the Euro and the Dollar.