UK interest rates rise unlikely after record inflation, hints BoE policy member
Soaring inflation has put the Bank of England (BoE) on a “shallower path” regarding an interest rate hike as it needs to lean against inflation pressures, according to a member of BoE's Monetary Policy Committee (MPC).
Catherine Mann, an external member of MPC, said on Friday that expectations for prices and wages, if realised, are ingredients for inflationary pressures that could stay strong for longer, perhaps well into 2023. Residual strength in both wages and prices are likely to continue well into 2022, she added.
Inflation now stands at 5.4%, the highest in nearly 30 years, adding pressure over interest rates as the next decision is due in just over two weeks.
Many economists think inflation will go higher than the BoE's most recent estimate of a peak of around 6% in April.
Read more: Inflation: Price rises may last until 2023, warns Bank of England governor
Mann said that current price and wage expectations are “inconsistent” with the BoE’s 2% inflation target.
"To the extent that monetary policy actions now dampen expectations, and ... that any deceleration of global prices is passed-through to UK inflation, and to the extent that financial markets are already cautioning decisions, the next steps could exhibit a shallower path," Mann said.
"We aim to bring inflation back down to target such that workers can enjoy real wage gains from their labour."
Still, she said, she awaits further research briefings before making up her mind on any rate rise vote.
Read more: UK inflation hits 30-year high as cost of living squeeze looms
"In my view, the objective for monetary policy now should be to lean against this 'strong-for-longer' scenario," she added in a speech to the OMFIF central banking think tank.
Mann was among the MPC majority who voted to raise rates in December.
Several economists expect the BoE to raise rates again to 0.5% on 3 February, after having increased it to 0.25% in December for the first time in over three years.