BoE rate setter Mann: Inflation 'gaps' make achieving 2% target sustainably 'elusive'
Catherine Mann (pictured) said financial conditions had eased 'too much already' since September, in part as markets now 'soon expect' cuts.
Mann, an external member of the BoE's Monetary Policy Committee, said during a speech on Thursday (8 February) that these gaps come from energy prices, the evolution of goods versus services inflation, and asymmetric behaviour of firm pricing.
«In the February forecast, headline inflation dips to 2% in early 2024, but only briefly. Stripping out the energy contribution to CPI inflation shows a much slower deceleration,» she said.
«Without energy contributions, inflation in fact never reaches the 2% target within the next three years. [...] I am not convinced that the near-term deceleration in headline inflation will continue.»
BoE policymaker pushes for rate cuts in warning of 'downside risks' for UK economy — reports
The former OECD chief economist highlighted the evolution of goods and services prices as crucial for achieving the 2% target sustainably. While goods inflation has come down quickly, services inflation remains sticky and elevated, posing challenges for returning headline inflation to target, she said.
Mann was one of two members of the MPC who voted in favour of a hike in the latest meeting, while six policy makers decided last week to maintain interest rates at 5.25%. Meanwhile, external member Swati Dhibgra was the only one who favoured a cut.
During her speech, Mann said her «finely balanced» decision to vote for a hike is justified based on prospects for rising real incomes, continued labour market tightness and positive forward-looking indicators of activity.
Moreover, she said financial conditions had eased «too much already» since September, when the MPC
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