BoE MPC member Catherine Mann, a known hawk, said in a speech that “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.”
She noted that “some (global) central bankers are seeing a turning point in data to which they are responding with an inflection in their respective policy paths”.
Also, “recent market chatter has focused on when central banks will stop hiking and if they will reverse, with fears torn between the risks of overtightening and stopping too soon.
But for assessment on the turning point, she is looking for “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”.
She emphasized, “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.”
BoE Pill more concerned about the potential persistence of inflation
BoE Chief Economist Huw Pill said yesterday, “I do have high degree of confidence (about getting inflation to target) because we know what we’re going to do. We’ve done a lot to achieve it, we’re prepared to do more as necessary to ensure that we achieve it sustainably.”
He also said the BoE had to “guard against doing too much” given the typical 18-month lag for rate hikes to impact the economy. “We are reaching the point where those types of concerns are in the forefront of our minds,” he said. “But if you ask me where we are at the moment, I think we are still more concerned about the potential persistence of inflation.”
Inflation pressure in the labor market “probably tilts us to saying we haven’t quite got to the point where we’re confident to engage in a discussion of a turning point in rates.”