The Bank of England is more likely to raise interest rates again than to start cutting them, says BoE policymaker Catherine Mann.
Mann, one of the more hawkish members of the Bank’s monetary policy committee, fears that there are “material upside risks” to the Bank’s inflation outlook.
Speaking at the Lámfalussy Lectures Conference in Budapest, Hungary, this morning, Mann cautions that the stabilization of headline UK inflation is not yet “the harbinger of a turning point towards a sustainable return to the 2% target”, given the sharp increase in food prices and services inflation.
Man says that the Bank should ‘stay the course’, after it raised interest rates to 4% last week.
It would be more of a mistake to stop tightening too soon, than too late, she argues: “ I am looking for a significant and sustained deceleration in higher frequency price increases and in the underlying inflation measures and expectations towards inflation rates that are consistent with achieving the 2% target.
“Uncertainty around turning points should not motivate a wait-and-see approach, as the consequences of under tightening far outweigh, in my opinion, the alternative. We need to stay the course, and in my view the next step in Bank Rate is still more likely to be another hike than a cut or hold.”
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