Bank of England rate-setter Catherine Mann said there is evidence of UK inflation becoming embedded and that price growth is taking longer to ease back than it did to jump.
(Bloomberg) — Bank of England rate-setter Catherine Mann said there is evidence of UK inflation becoming embedded and that price growth is taking longer to ease back than it did to jump.
Mann said research suggests that it is “better to front load your policy decisions” in a backdrop of inflation uncertainty, a contrast with the slow start to the hiking cycle agreed by the BOE’s nine-member Monetary Policy Committee 1 1/2 years ago.
“There is evidence of persistence, stickiness, embeddedness, backward looking-ness,” Mann said Friday on a panel in New York hosted by the Central Bank Research Association. “We’re working through the entire thesaurus here to come up with words to describe inflation dynamics that decelerate more slowly than accelerate.”
Mann is seen as the most hawkish rate-setter on the BOE’s nine-member rates panel. She has long warned of the danger of persistent inflation in the UK, often voting for tougher action to stamp out price pressures than her peers.
“I stand by my votes — I am very comfortable with how I voted,” Mann said, sidestepping the question of where she thinks rates should go next.
Her hawkish stance has been vindicated by the BOE stepping up the pace of its interest rate rises at its June meeting after a string of shock inflation readings that deepened fears of stickier prices.
Investors are now betting on another half point increase in interest rates at next month’s meeting followed by a peak as high as 6.5%, up from 5% currently.
Mann also pointed to evidence that suggests that energy and food prices are more important for the direction of households’ inflation expectations.
“You have inherent bias upward, in an environment of greater underlying volatility,” Mann said. “That inherent puts an upward underpining tailwind to the aggregate inflation process.”
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