Homophones – Remarks by Huw Pill

Pill lays out why he has been voting for 4% against a majority holding Bank Rate at 3.75%, and attacks the 'wait-and-see' framing directly: uncertainty around Gulf energy prices is Knightian and will not resolve, so waiting just means waiting. The substantive new material is a staff 'sticky-central' underlying inflation measure whose BVAR projection stays meaningfully above 2% through the forecast even as headline returns to target, with risks skewed up. He also pushes back hard on the idea that the upward-sloping OIS curve can do the MPC's tightening for it, arguing those premia are partly a creature of the MPC's own scenario choices.

What’s new: Pill's hawkish dissent is old news and fully priced. Genuinely new: (1) the 'sticky-central' underlying inflation model and its forecast that underlying inflation stays above 2% on an unchanged 3.75% Bank Rate while headline falls back in 2027; (2) his explicit framing that the April A/B/C scenario set produced a bi-modal market distribution that entrenched a hold-plus-premium pricing, while July's scenarios gave a single peak with higher mean and mode; (3) his statement that markets may have 'gotten-ahead-of-themselves' on cuts, i.e. the front end is too easy, and that the Committee will eventually have to either validate the forward curve by hiking or let the curve fall. None of this shifts the majority, but it is a reasoned case that the internal analytical toolkit is generating an upside inflation signal the headline data does not show.

KEY FINDINGS

• Pill confirms he voted for 4% at the July meeting and prior meetings, against a majority holding at 3.75%, and frames the split as a live minority rather than a token dissent. Confirms a persistent hawkish bloc anchoring the near-term floor under Bank Rate and reduces the odds of a near-term cut being delivered without a fight.
• New staff 'sticky-central' underlying inflation measure: BVAR median projection on unchanged 3.75% has headline returning to target in 2027 but underlying stuck meaningfully above 2%, with risks clearly to the upside. Gives the hawks a published internal metric that will not roll over as headline energy effects unwind, so falling headline CPI prints buy less dovish ammunition than usual.
• He rejects the argument that the upward-sloping money market curve substitutes for hikes: the MPC will eventually have to validate the curve by hiking or acquiesce in it shifting down, and there is 'wrong-way risk' that markets ease conditions exactly when the MPC needs tightening. Signals internal discomfort with letting front-end premia do the work, a channel for the MPC to lean against front-end rallies.
• He says markets may have already got ahead of themselves on prospective cuts prior to the energy shock, and wants the MPC to be an anchor for the short end rather than chase market pricing. Direct verbal pushback on front-end pricing from a sitting MPC member.
• On scenario design: April's A/B/C set produced a bi-modal one-year Bank Rate distribution (hold vs a jump toward 5%), which he says encouraged markets to price a hold plus a premium; July's baseline-plus-scenarios structure produced a single peak with higher mean and mode. Tells the desk the Bank is consciously using scenario architecture to steer curve shape, so future MPR scenario selection is itself a tradeable signal.
• He is convinced longer-term inflation expectations have not de-anchored, and accepts second-round effects are weaker with labour market slack, but says catch-up dynamics emerge slowly and no definitive evidence will arrive soon. His case is structural and evidence-light by construction, which limits how much benign wage and price data can move him and equally limits his ability to win over the median voter.

FROM THE DOCUMENT

As reflected in my vote at the July MPC meeting (and indeed prior meetings), my own response to this question has pointed to a need to raise Bank Rate to 4% on the grounds:

After all (and I said during a talk in March in Washington, DC): if you follow a ‘wait-and-see’ approach and then do not ‘see’, all you have done is waited.

While the latter falls back towards target in 2027, the underlying measure remains stuck meaningfully above 2%, with the risks around this projection being clearly to the upside.

Just as we the MPC was wary of allowing markets to ‘get-ahead-of-themselves’ with respect to prospective Bank Rate hikes in the immediate after math of hostilities breaking out in the Gulf, we should also recognise that markets may have already ‘gotten-ahead-of-themselves’ with respect to prospective Bank Rate cuts before the energy price shock.