BOE’s Pill Warns of Energy Price Volatility Persisting Into 2027

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessBOE's Pill Warns of Energy Price Volatility Persisting Into 2027Bank of England Chief Economist Huw Pill said the wild swings in energy and commodity prices due to the Iran war could linger into 2027, highlighting the risk that inflation stays elevated for longer and forces policymakers to respondAuthor of the article: You can save this article by registering for free here. Or sign-in if you have an account.Huw Pill Photo by Graeme Sloan /Photographer: Graeme Sloan/Bloom(Bloomberg) — Bank of England Chief Economist Huw Pill said the wild swings in energy and commodity prices due to the Iran war could linger into 2027, highlighting the risk that inflation stays elevated for longer and forces policymakers to respondTHIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountSpeaking in a briefing on Friday, Pill cautioned that developments in the Middle East — and how they ultimately reverberate across the British economy — remain “profoundly uncertain” and difficult to predict. The BOE has little visibility on either the duration or the scale of the conflict, he added, as highlighted by the stop-start nature of US-Iran talks in recent weeks.“There might have been a hope back in April that things are very uncertain, but at least by July we’ll know where we stand,” Pill told the BOE’s agents network. “That uncertainty has not resolved itself yet, and we could be facing quite a lot of volatility in energy and commodity prices through the end of this year into next year.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againPill, one of the most hawkish policymakers on the BOE’s Monetary Policy Committee, was one of the three dissenters who voted to raise interest rates this week. The other six — including Governor Andrew Bailey — favored keeping borrowing costs on hold citing easing price pressures and little evidence that the energy shock is fueling higher wage demands.The chief economist’s comments underscore President Donald Trump’s outsized influence on UK monetary policy as hostilities between the US and Iran flare once again, causing a fresh spike in oil and gas prices. While the BOE’s central projection is for inflation to peak at 3.2% at the end of the year, an “adverse” scenario under which energy costs surge and trigger second-round effects could see price growth reach 4.5% in 2027 and interest rates rise sharply from their current 3.75%.Pill made his comments as UK petrol prices reached their highest level since 2022 on Friday, climbing to 159.97 pence (214.73 US cents) a litre, according to Motoring organization RAC. They are now 20% higher than before the war in Iran. The risks to inflation are on the “upside,” Pill said.A key point of disagreement among BOE policymakers, Pill said, is whether those pressures will cause firms to raise prices and workers to demand pay increases. Some, including Bailey, argue that weak demand and a soft jobs market will temper the energy shock. More hawkish voices, however, back a so-called “insurance hike” to prevent pressures from materializing.Pill cautioned that monetary policy should “head off those second-round effects, rather than wait for them to emerge and then only respond retroactively when they’ve already achieved that self-sustaining momentum.” He added that “squeezing that out of the system to achieve a 2% inflation target may be more costly and more difficult.”The BOE is focusing on margins, costs, prices and wages for warning signs of that self-sustaining momentum is building up. Pill warned that the BOE shouldn’t put too much weight on the lack of evidence of second-round effects, and suggested there’s still potential for “more slow-moving but maybe more insidious second-round effects coming from higher costs.”Still, the MPC has drawn comfort from a lack of “substantial de-anchoring of inflation expectations,” Pill said.While overall demand is fragile, Pill said that some parts of the economy, such as those related to the adoption of artificial intelligence, enjoy strong pricing power. He highlighted rapid increases in chip prices, warning that could fuel inflationary pressures going forward.“The complexity and interaction of all these things needs to be taken into account,” Pill said.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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