UK inflation is rising. The Bank of England's chief economist thinks waiting is the bigger risk - and he just publicly broke with his own boss to say so.
Huw Pill, the BoE's Chief Economist, told a NatWest audience on Thursday that a "prompt but modest" rate hike would help stop Iran war price pressures from getting stuck in the British economy.
His argument: if the BoE waits until the market forces it to move, that creates bigger problems than acting a bit early.
Move now, move small, and shape how businesses and workers respond before inflation expectations harden. That's the case for getting ahead of the price story rather than chasing it.
Pill was the only Monetary Policy Committee member to vote for a hike at April's meeting, where the BoE held its Bank Rate at 3.75%. The other 8 members voted to hold.
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Pill's speech put him publicly at odds with his colleagues. Deputy Governor Sarah Breeden told the Financial Times the same day that rates didn't need to rise in June or July, and Governor Andrew Bailey has said he wants more time to assess.
Pill pushed back on the "wait and see" view by comparing now to past oil shocks. He thinks the risk of second-round effects - companies raising prices, workers asking for higher pay - is probably weaker than after Russia's 2022 invasion of Ukraine.
The reason: the UK labor market is soft. When workers don't have leverage, wage demands don't take off.
But Pill also said it's not clear the labor market is as loose as it was during the 2008 and 2011 oil price spikes, when second-round effects never showed up. That's the part of the picture that argues for moving sooner.
Political pressure on Prime Minister Keir Starmer has pushed long-dated UK government borrowing costs to their highest level in nearly three decades. Pill said the BoE might want to offset some of that pressure on the economy, but not if the rise in market rates is being driven by inflation worries.
The next BoE meeting will tell investors whether Pill's view is gaining ground.
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