London Daily

Focus on the big picture.
Saturday, May 31, 2025

Bank of England needs to push back against inflation -Mann

Bank of England needs to push back against inflation -Mann

The Bank of England needs to lean against inflation pressures and stop expectations of higher price growth from getting entrenched in businesses' wage and pricing decisions this year, BoE policymaker Catherine Mann said on Friday.

The BoE is widely expected to raise interest rates at its Feb. 3 meeting, after becoming the world's first major central bank to tighten policy in response to post-pandemic inflation pressures in December.

British inflation in December was its highest in nearly 30 years at 5.4%, and Mann said the BoE's monthly survey of businesses showed their pricing and wage-setting expectations were not consistent with inflation returning to its 2% target.

"The ingredients appear to be in place for inflation to stay strong for longer, but costs becoming embedded in prices to create a reinforcing dynamic is not inevitable," Mann said in a speech to OMFIF, a central banking think tank.

"In my view, the objective for monetary policy now should be to lean against this 'strong-for-longer' scenario," she added.

Mann is the first BoE official to give a speech on monetary policy since the Dec. 16 rate rise. Chief Economist Huw Pill said in a CNBC interview on Dec. 17 after that more rate rises were likely if inflation stayed high, and Governor Andrew Bailey told a parliament committee on Wednesday that he was concerned about the outlook for natural gas prices and wages.

Mann, who voted with the majority on the BoE's Monetary Policy Committee to raise rates in December, said she was waiting for new BoE staff briefings before she decided whether rates needed to increase in February.

Depending on the strength of global inflation pressures, BoE monetary policy could need to be tighter than warranted by British domestic economic conditions alone, she said.

ACT SOONER, NOT LATER


But early action to push down on the public's and businesses' inflation expectations could limit the amount of tightening needed further along the line.

"To the extent that monetary policy actions now dampen expectations, and to the extent that any deceleration of global prices is passed through to UK inflation, and to the extent that financial markets are already cautioning decisions, the next steps could exhibit a shallower path," Mann said.

In a question and answer session, Mann rejected a charge that the BoE had been too slow to start raising rates.

Higher rates would have had little effect on surging energy prices or global supply chain problems, employment remained below pre-COVID levels and economic output was still lower than where it would have been without the pandemic, she said.

Equally, the BoE could not take the same approach as in 2011 when there was a spike in oil prices that also pushed inflation above 5%, but which came at a time when British unemployment was near its peak after the global financial crisis.

"Where we are now, I think, is potentially a 'regime change' where we have a tight labour market, we have tight goods markets ... That is an environment where firms and workers see themselves as having pricing power," Mann said.

Central bankers have generally played down any similarity between now and the 1970s, when most Western economies suffered from a self-reinforcing spiral of wages and prices at a time of greater trade union power and less focused monetary policy.

But even with an unfavourable inflationary backdrop, Mann said it was unclear how far interest rates would need to rise.

Businesses' ability to raise prices would be limited by the ongoing squeeze on consumers' disposable income, amplified by tax rises taking effect in April. A "very steep yield curve" in financial markets also tightened financial conditions.

Newsletter

Related Articles

0:00
0:00
Close
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
Italy Faces Population Decline Amid Youth Emigration
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Trump Accuses China of Violating Trade Agreement
Gerry Adams Wins Libel Case Against BBC
Russia Accuses Serbia of Supplying Arms to Ukraine
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
Chinese Woman Dies After Being Forced to Visit Bank Despite Critical Illness
President Trump Grants Full Pardons to Reality TV Stars Todd and Julie Chrisley
Texas Enacts App Store Accountability Act Mandating Age Verification
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Vatican Calls for Sustainable Tourism in 2025 Message
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Trump Threatens 25% Tariff on iPhones Amid Dispute with Apple CEO
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
Liverpool Car Ramming Incident Leaves Multiple Injured
Australia Faces Immigration Debate Following Labor Party Victory
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
Macron Dismisses Viral Video of Wife's Gesture as Playful Banter
Cleveland Clinic Study Questions Effectiveness of Recent Flu Vaccine
Netanyahu Accuses Starmer of Siding with Hamas
Junior Doctors Threaten Strike Over 4% Pay Offer
Labour MPs Urge Chancellor to Tax Wealthy Over Cutting Welfare
Publication of UK Child Poverty Strategy Delayed Until Autumn
France Detains UK Fishing Vessel Amid Post-Brexit Tensions
Calls Grow to Resume Syrian Asylum Claims in UK
Nigel Farage Pledges to Reinstate Winter Fuel Payments
Boris and Carrie Johnson Welcome Daughter Poppy
×