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In a speech today, BoE Chief Economist Huw Pill highlighted that while it is “welcome news” that the UK’s headline CPI returned to 2% in May, it is crucial for the inflation target to be achieved on a “lasting and sustainable basis.”

He emphasized three key indicators of inflation persistence: labor market tightness, pay growth, and services price inflation. Pill noted that recent developments in these areas suggest “some upside risk to my assessment of inflation persistence.”

Pill pointed out that annual rates of services price inflation and wage growth, which remain close to 6%, indicate an “uncomfortable strength” in the underlying inflation dynamics.

He also cautioned that the MPC should remain cautious about interpreting any “single data” point as either a “necessary or sufficient trigger” for reassessing their stance.

Full speech of BoE’s Pill here.

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