Pill's case for 4 per cent
In his own account of the reasoning, Pill said the Middle East conflict has created what he called Knightian uncertainty: risk so profound that it cannot be resolved through further analysis or the passage of time, unlike the more familiar propagation of an energy shock into everyday prices. He argued the Monetary Policy Committee's discussion splits that uncertainty into two parts, the size of the initial shock to energy prices and the risk that it feeds into lasting second-round effects on wages and costs, and said his own concern about the second kind is higher than the average committee member's. On that basis he said his vote at the July meeting, and in earlier meetings, pointed to a need to raise Bank Rate to 4 per cent, citing three reasons: a clear signal of the committee's willingness to act, the difficulty of fine-tuning a response to what he called bounded uncertainty about energy prices, and his own above-average concern that the UK's weakened supply side leaves it vulnerable to catch-up inflation dynamics. He added that a prompt increase need not start a prolonged run of rate rises, but could instead head off the more persistent price pressures that a delayed response risks entrenching.[1]