BoE MPC member Catherine Mann said in a speech that the key topics for her for the May meeting was on “how much and when the expected consumption drag (from high energy inflation) materialises”. And, “whether we start to see any indication of price forecast revisions in the DMP survey”.
“If they do, this potentially would short-circuit the expectations-formation process underpinning the domestic inflation ratchet, which has been my central concern”, she added.
However, “should the impact on aggregate demand of the energy price shock end-up being more modest than currently foreseen, should wage and price expectations and outcomes remain as strong as they currently are, and should financial markets return to being copacetic on private credit and duration risk, a reassessment of the pace of tightening would be warranted.
“Monetary policy needs to keep inflation expectations anchored; by doing so now, less tightening will be required later, when demand may still be weak”, she added.
