Hugh Pill tipped to be among those pushing for a more hawkish stance
A split decision at the Bank of England is again in focus, with economists expecting dissenting policymakers to argue for higher interest rates when the Monetary Policy Committee (MPC) meets this week.
Forecasts from JP Morgan, BNP Paribas and Goldman Sachs suggest at least two members could vote in favour of a rate increase, even as the central expectation remains that policy will be left unchanged. Projections point to a 7–2 split in favour of holding.
At the centre of that expected dissent is Huw Pill. The Bank’s chief economist is widely seen as likely to push for a more restrictive stance, having repeatedly warned that interest rates have been reduced too quickly since their mid-2023 peak of 5.25%.
Inflation has done little to settle that argument. After briefly returning to the 2% target in mid-2024, price growth rose again, reaching 3.8% as businesses passed on increased costs to consumers, partly linked to changes in employers’ national insurance contributions.
Pill has previously said the Bank should have been more “cautious” in cutting rates, particularly given how inflation expectations became embedded following Russia’s invasion of Ukraine. Those expectations, he argued, continue to shape wage demands and pricing decisions.
The significance lies less in the immediate decision than in what it signals. Persistent divisions within the MPC point to an uncertain path for rates, even if the headline decision is unchanged. Mortgage pricing continues to track movements in swap rates more closely than the base rate itself, leaving lenders guided by funding costs rather than policy signals alone.
That distinction is reflected in how clients are responding, said Matthew Arena, Managing director or Brilliant Group. "Base rate hits confidence in the market and decision making but mortgage pricing affects people on the ground where decisions have usually been made so it creates a sense of pressure and urgency."
Geopolitical risk is adding to that uncertainty. Economists suggest Pill could point to energy market volatility linked to tensions involving Iran as a potential trigger for renewed inflationary pressure. With inflation risks still in view, Pill has said monetary policy may need to “contain” any renewed spike.
“It’s likely to be a gentle application of the brake rather than an emergency stop,” Arena said.
One area of agreement is the level of uncertainty. Sanjay Raja, Chief UK Economist at Deutsche Bank has suggested the possibility of a 25 basis point cut, citing potential “non-linear shocks” to the labour market and growth.
“The word of the day, we think, will be ‘risk’,” he said. “Indeed, with the UK dealing with the unfolding repercussions of the Iran conflict, ‘risk’ remains rife.”
Conditions in the lending market also appear to have stabilised, Arena added, “It’s still incredibly active but it has settled a little so is more manageable than it was at its most volatile.”
For advisers, the picture is familiar. The base rate decision may hold, but the direction of travel remains uncertain, leaving mortgage pricing sensitive to market movements rather than anchored to a clear policy path.
