The Bank of England should raise its key interest rate to limit the risk that inflation will stay above its target for a prolonged period, even though the course of the war in the Middle East remains highly uncertain, Chief Economist Huw Pill said Thursday.

Pill has long favored a higher level for the key rate than his colleagues on the nine-member Monetary Policy Committee. He was joined by two other members in voting for a rate rise in July, with six members backing a hold.

In a speech in Edinburgh, Pill again made the case for raising borrowing costs, stressing that uncertainty about the duration and intensity of the war between the U.S. and Iran, and therefore the future path of energy prices, is unlikely to be resolved soon.

"Even if a new ceasefire were announced tomorrow, experience suggests we would be hard-pressed to assess its effectiveness, how long it might last and what would follow its expiry," he said. "Likewise for any re-escalation of the conflict."

The U.K.'s annual rate of inflation stood at 2.9% in July, lower than expected when the war began, but above the BOE's 2% target. However, the inflation rate is expected to pick up in subsequent months as home energy prices start to rise.

There have been few signs of second-round effects, such as a rise in pay awards that would prompt businesses to raise their prices to preserve profit margins and lead to more widespread and persistent inflation.

Pill said it was nonetheless preferable to raise borrowing costs now to limit the risk that second-round effects would emerge during the next round of pay negotiations in early 2027, rather than wait and have to move more aggressively.

"Raising Bank Rate on this basis need not be the start of a prolonged and aggressive series of increases," Pill said.

Some MPC members have argued that the rise in government bond yields since the war began has already placed additional restriction on activity and inflation, and there is therefore no pressing need for the central bank to act. That rise in yields accelerated earlier this week.

However, Pill said that since higher yields have partly been driven by expectations that the BOE would lift borrowing costs, investors might instead come to expect that the key rate will fall in 2027 if the central bank stays on hold.

"In this setting, the market will ease financial conditions just when the MPC needs them to tighten," he said.

Despite Pill's advocacy for a move, investors expect the MPC to again leave the key rate at 3.75% when it meets later this month.

The European Central Bank is next week expected to deliver its second rate rise since the war began, while the Federal Reserve may soon join the growing number of central banks that have tightened policy in response to higher energy prices.