BoE might consider rate cut during the summer, chief economist says

LONDON (Reuters) - The Bank of England might be able to consider cutting interest rates over the summer although Britain's labour market remains tight by historical standards, the central bank's chief economist Huw Pill said on Tuesday.

"I think it's not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration," Pill said in an online presentation organised by the ICAEW, an accountancy body.

Pill voted with the majority of the BoE's Monetary Policy Committee last week to keep interest rates at a 16-year high of 5.25% after which he said betting too heavily on at the BoE's June rate meeting would be a bad idea.

Sterling weakened against the dollar and two-year government bond yields, which are sensitive to speculation about BoE rate moves, were down by three basis points after Pill's comments on Tuesday.

Interest rate futures showed a 52% chance of rate cut in June, up slightly from earlier, and a first cut fully priced in for the BoE's August meeting.

In his presentation, Pill said official data published earlier on Tuesday were consistent with a small further decline in the pace of private sector regular pay growth in the first three months of 2024.

But he cautioned against reading too much into other signs of a weakening of the inflationary heat in the jobs market.

"There has been an easing of the labour market but it still remains pretty tight by historical standards," he said.

(Reporting by William Schomberg and Suban Abdulla)