Bank of England policymaker Catherine Mann stated to the Financial Times on Tuesday that companies will find it tough to raise prices this year due to job losses and a decrease in consumer spending. Mann mentioned that upcoming price increases would align with the bank's target and noted a potential nonlinear decline in employment data.
The bank's inflation target stands at 2%, but it anticipates inflation to be nearly double that figure this year. Mann, previously known as the most hawkish member of the Monetary Policy Committee, advocated for a larger interest rate cut to 4.25% after the recent 0.25% reduction to 4.5%.
Emphasizing the need for clear communication, Mann believed that a half-point rate reduction was necessary to convey the importance of facilitating smoother financial conditions. She indicated to the FT that a substantial rate cut is a more effective way to communicate ideal economic conditions.
Mann expressed the importance of preventing inflation from triggering wage increases by companies, which could lead to further price hikes. She stated her need for additional data to assess and prevent such second-round effects.
Following the Bank of England's reduction of its 2025 growth forecast last week, it was a setback for finance minister Rachel Reeves' efforts to accelerate economic growth.