BoE MPC member Catherine Mann explained her notable policy shift during an interview with CNBC, revealing why she moved from backing a 50bps rate cut in February to voting for a hold at last week’s meeting.

Mann cited the UK labor market’s resilience as a key factor in her reassessment. While recent data suggest some moderation “a slowing labor market”, she argued that “it is not a non-linear adjustment.”

Mann also flagged a new risk emerging from tariffs. She warned that rising US tariffs on countries like China could lead to an influx of diverted exports into markets such as the UK. While this could temporarily ease goods prices at the border, she cautioned that domestic retailers may use the opportunity to rebuild profit margins, keeping upward pressure on consumer price inflation rather than alleviating it.

Crucially, Mann emphasized the need to see a broad-based “loss of pricing power” in firms. “I need to see that firms are starting to be much more moderate in setting their prices across a broad range of products,” she added. “Goods price inflation is actually going up, not down.”

Speaking at a press conference today, BoE Chief Economist Huw Pill warned that returning inflation to the 2% target may prove more difficult than anticipated. Hence, Pill said the central bank may need to respond in a “somewhat more aggressive or more persistent” way to ensure inflation is brought under control within a reasonable time frame.

He raised concerns that recent shifts in wage and price-setting behavior might reflect a more “structural change”, drawing parallels with inflation dynamics of the 1970s and 1980s.

Pill emphasized that investors should not interpret BoE’s latest forecast, showing inflation returning to target by early 2027 based on market-implied rates, as a clear endorsement of future rate cuts.

Instead, he pointed to the Bank’s more inflationary risk scenario, which assumed persistently weak productivity and stronger wage pressures. These conditions, he said, echo past inflation crises, where elevated price levels triggered repeated and entrenched pay demands.

Last week, Pill voted against the BoE’s quarter-point rate cut, aligning with fellow hawk Catherine Mann in preferring to keep rates unchanged.

BoE MPC member Alan Taylor explained his decision to vote for a 50bps rate cut last week, warning that both global and domestic conditions have deteriorated significantly.

He pointed to a “quite perilous” international trade environment, driven in large part by broader-than-expected US tariffs. Also, “the erosion of confidence that we saw has continued”, he added, with low readings in business surveys like the PMI and REC, along with signs of increased precautionary saving and delayed investment.

Taylor also called the recent UK-US trade deal “quite slender,” noting that most British exports will still face a 10% tariff, offering little near-term relief for exporters.

Taylor warned that waiting for complete confirmation that all inflation pressures had eased before easing policy further could leave BoE behind the curve.