MNI BRIEF: UK Fiscal Shift Needs MonPol Response - BOE Pill

The change in UK fiscal policy announced Friday are significant and it is hard to argue that it will not need "a significant monetary policy response," Bank of England chief economist Huw Pill said Tuesday.

Pill said the correct vehicle for assessing the change in government's fiscal policy was the Monetary Policy Committee's November forecast round, making clear he did not envisage any emergency rate hike.

Speaking at a Barclays event, Pill said that his view was that the change in fiscal policy would act as a demand stimulus. His comments, the first direct response by a Bank policymaker since Friday's 'mini-Budget', make clear that he sees the MPC hiking policy more aggressively than it would if the government had not pressed ahead with its hefty fiscal package, and that interest rates and fiscal policy will be heading in opposite directions.

Markets have been pricing in a75 basis point hike in November, but recent days have seen that balloon, with short-sterling futures now suggesting a Bank Rate above 6% by end-2023.