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: 2025.09.23
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BoE's Pill: Observing more lasting changes to price and wage-setting
World FX news
Breaking news
BoE's Pill: Observing more lasting changes to price and wage-setting
2025.09.23 19:36
2025.09.23 19:36
Bank of England (BoE) Chief Economist Huw Pill said on Tuesday that they have seen some more lasting changes to price and wage-setting in the UK, per Reuters.
Key takeaways
"Inactivity, Brexit and immigration changes could allow for larger markups on wages which might support inflation."
"I am more comfortable now on balance of inflation risks than 6-12 months ago."
"We don't want to constrain banks' ability to use liquidity."
"Last week's MPC vote on QT pace was a pragmatic approach to reducing footprint in markets."
"Last week, I put higher weight on the need to get out of QE portfolio more quickly."
"We have been clear we will not sell gilts into a dysfunctional market."
Market reaction
These comments received a hawkish score of 7.0 from FXStreet BoE Speech Tracker. Nevertheless, GBP/USD's reaction was muted and the pair was last seen trading marginally lower on the day at around 1.3500.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve 'price stability', or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England's target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects - a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets - usually government or AAA-rated corporate bonds - from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
Last updated
: 2025.09.23
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