Bank of England rate setter Catherine Mann breaks ranks with gloomy inflation prediction

investmentweek.co.uk:

Catherine Mann is a member of the Bank of England's Monetary Policy Committee

Speaking on Monday (3 October), Mann, who is an external member of the Monetary Policy Committee, said she thought predictions published by the Bank in August overshot the impact interest rate increases have had since the current hiking cycle began in December 2021, according to Reuters.

Bank of America forecasts no rate cuts for UK until 2025 due to 'entrenched inflation'

In a speech hosted by Redburn Atlantic, a brokerage owned by Rothschild & Co, Mann, who has consistently pressed for higher interest rates, said: «I believe the (Monetary Policy Report) forecast, for a long time, has been telling a story fundamentally different from the one I consider likely.

»My story has been one of more resilient domestic demand and more persistent price pressures, which therefore requires a more restrictive monetary policy stance," she added.

The Consumer Prices Index rose by 6.7% in the 12 months to August 2023, according to the latest figures available, down from 6.8% in July, and down from the peak of 11.1% in October 2022.

In the Bank of England's August Monetary Policy Report, it predicted that inflation «is expected to fall significantly further, to around 5% by the end of the year, accounted for by lower energy, and to a lesser degree, food and core goods price inflation». 

According to its «most likely» projection, conditioned on market interest rates, CPI inflation «returns to the 2% target by the second quarter of 2025». 

Bank of England rate setter Catherine Mann: UK interest rates need to be raised further

It then falls below the target in the medium-term, «as an increasing degree of economic slack reduces domestic inflationary pressures,