The Bank of England might be able to consider cutting interest rates over the summer although Britain's labour market remains tight by historical standards, the central bank's chief economist Huw Pill said today.
"I think it's not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration," Pill said in an online presentation organised by the ICAEW, an accountancy body.
Pill voted with the majority of the Bank of England's Monetary Policy Committee last week to keep interest rates at a 16-year high of 5.25% after which he said betting too heavily on at the bank's June rate meeting would be a bad idea.
Sterling weakened against the dollar and two-year government bond yields, which are sensitive to speculation about Bank of England rate moves, were down by three basis points after Pill's comments today.
Interest rate futures showed a 52% chance of rate cut in June, up slightly from earlier, and a first cut fully priced in for the Bank of England's August meeting.
In his presentation, Pill said official data published earlier today were consistent with a small further decline in the pace of private sector regular pay growth in the first three months of 2024.
But he cautioned against reading too much into other signs of a weakening of the inflationary heat in the jobs market.
"There has been an easing of the labour market but it still remains pretty tight by historical standards," he said.
