BoE's Pill calls for 'prompt but modest' rate hike to quell inflation pressure

LONDON, May ​14 (Reuters) - Bank ⁠of England Chief Economist Huw Pill said ​on Thursday a "prompt but modest" increase in interest rates would help to head off the risk of inflation ​pressure ‌caused by the Iran war becoming stuck in the British economy. Pill, who cast the lone vote ⁠for an increase in borrowing costs at the BoE's rate-setting ⁠meeting in April, said policymakers needed ​to think about whether rates should go up sooner rather than later.

"If you wait until the market is forcing you to move, I think that may involve more challenges for the ​central ‌bank than if you act a little more actively," he said at an event hosted by NatWest.

However, he also said it was not clear the labour market was as loose as when there were oil price spikes in 2008 and 2011, which did not lead ⁠to second-round ⁠effects on inflation. As well as worries about inflation caused ‌by the Iran war, political pressure on Prime Minister Keir Starmer has pushed long-term British government borrowing costs to ​their highest levels in ​nearly three decades in recent days. Asked about the rise in ‌those borrowing costs, Pill said the BoE might want to offset some of the pressure on the economy but not if the increase in market rates was driven by inflation concerns. (Reporting by David Milliken Editing by William Schomberg and Paul Simao)