BoE’s Pill: Structural Changes Leave UK Inflation More Persistent

Bank of England Chief Economist Huw Pill said structural shifts in the UK economy—especially in labor and goods markets, with Brexit cited as one factor—have made inflation more persistent and harder to return sustainably to the 2% target. He argued that monetary policy can cool demand but cannot fully offset supply-side constraints such as lower labor mobility and higher trade frictions. The comments support a cautious BoE stance and imply policy may need to stay restrictive for longer if inflation proves less responsive to tightening. For markets, the message is mildly hawkish for UK rates and broadly supportive of a firmer policy backdrop, which could keep pressure on rate-sensitive UK assets while underpinning sterling relative to easier-policy expectations.