BoE MPC Catherine Mann emphasized the significance of the duration of inflation in guiding her future policy decisions.
Mann pointedly remarked, “Going forward, a very important ingredient for my decision-making is the duration of inflation, and how long it is exceeding target.”
The MPC member expressed concerns that prolonged inflation above the target could lead to a “drift” in medium-term expectations. Monetary policy “has to be more aggressive, because it has to address both a drift in expectations as well as the actual inflation above target,” Mann further elaborated.
Mann also warned of the challenges that could arise if inflation remains persistently above the target. “If inflation gets embedded for longer above target, then getting it to target is going to require more policy action for longer and that I’d rather not have to do because people become backward looking,” she said.
In the context of future economic shocks, Mann anticipates an “upward bias” in inflation, suggesting that a higher neutral rate of interest is “a very plausible outcome.”
