Huw Pill, the Bank of England’s chief economist, does not yet appear convinced that an interest rate cut in August is necessary, but said a rate cut was a matter of “when, not if”.

In a speech at Asia House in London, Pill said recent economic data indicated some “risks to my assessment of the persistence of inflation.”

Pill was referring to the latest data on services inflation and wage growth, which the Bank considered good indicators of the persistence of inflation.

He said annual services inflation and wage growth “continue to point to the troubling strength of these underlying inflationary factors.”

Services inflation was 5.7 percent in May, down from 5.9 percent in April. Annual private-sector wage growth, meanwhile, is still around six percent.

Although the headline inflation rate has fallen towards target, the Bank’s economists fear it will be difficult to keep inflation at two percent if price pressures remain strong.

Pill admitted that these were “noisy data series” but still argued that “it is hard to argue against the thesis that the persistence of UK inflation continues to prove – well – persistent”.

“More data will emerge before we make the next policy decision at the MPC meeting on Aug. 1,” Pill said. “But we need to be realistic about how much one or two publications can add to our assessment.”

The Bank of England left interest rates at 5.25 per cent at its last meeting in June, but minutes of the meeting revealed the decision was “delicately balanced”.

The pound rose just under 0.4% against the dollar after Pilla’s comments, while the FTSE 100 fell slightly as investors reduced their bets on a rate cut in August. Markets believe there is a 50% chance the Bank will cut rates next month, up from more than 60% before Pilla’s speech.

Despite concerns about persistent inflation, Pill remained confident that higher interest rates had helped contain inflation.

“The latest data remain consistent with the view that inflationary pressures have now been contained and may be starting to return to levels more consistent with achieving the inflation target,” he said.

“In the absence of any major new shocks, characterizing future rate cuts in terms of ‘when’ rather than ‘if’ still seems appropriate,” he added.