Interest rate rises are unlikely to be a repeat of the aggressive hiking cycle of 2022, the Bank of England's chief economist has said, adding that rates could stay on hold — or even fall — next year if economic growth stalls.

No preset path

Huw Pill, a member of the Bank's rate-setting Monetary Policy Committee, said on Friday that there was "no preset upward path for interest rates from spring and beyond". He said the outlook would become more uncertain from spring 2027, when key evidence on whether higher energy costs are feeding into wages and prices will emerge.

Pill said it was possible that Bank Rate "would stay on hold or even fall if we saw stalling of growth next year". He stressed the decision to raise rates this week was pre-emptive, aimed at containing inflation before it becomes entrenched, and said there was still limited evidence of so-called second-round effects from higher energy prices.

Thursday's rise

The Bank raised Bank Rate by a quarter of a point to 4% on Thursday, its first increase since August 2023, with the committee voting 8-1. Catherine Mann, the lone dissenter, wanted a half-point rise. Governor Andrew Bailey said the increase "shouldn't be seen as the first in an inevitable long sequence of hikes", but that it was unlikely to be the last unless the conflict in the Middle East was resolved.

Pill referred to Bailey's view that the current episode was "probably not going to be a repeat of the 2022 experience", when the Bank raised rates eight times in a row over the course of the year.

What markets expect

Financial markets are expecting a further three rate hikes, Pill said. The Bank's own survey of market participants had a median path reaching 4% in November and 4.25% in February, although Pill said nothing was "baked in" for next year.