BoE’s Mann skeptical of continuing decline in UK inflation

BoE MPC member Catherine Mann expressed skepticism about the continuation of the recent deceleration in headline inflation, challenging the prevailing market sentiment anticipating imminent rate cuts by the central bank. “I am not convinced that the near-term deceleration in headline inflation will continue,” Mann stated.

As financial markets are expecting rate reductions from the current 5.25%, her concern is that financial conditions have “eased too much already,” complicating BoE’s efforts to anchor inflation expectations and stabilize price growth.

Mann also highlighted “upside risks” to inflation stemming from geopolitical tensions in the Red Sea, noting that increased shipping and insurance costs could exacerbate the UK’s inflation challenges. ”

Against a backdrop of sluggish supply growth and possible upside shocks, I see risks of continued inflation momentum and embedded persistence,” she remarked.

Comparing UK’s inflation dynamics with its international peers, Mann expressed reservations about the optimistic view that the UK is merely trailing slightly behind in its efforts to return inflation to target. “A look at the data suggests to me that the ‘bit later’ might be quite a while later,” she cautioned.

In the latest MPC meeting, Mann, alongside fellow external member Jonathan Haskel, stood out for advocating an additional interest rate hike. Mann described her decision as “finely balanced,” attributing her stance to UK’s slower progress in reducing inflation compared to US and Eurozone.