Catherine Mann, who sets the interest rate for the Bank of England, calls for “continuous holding of bank interest rates” to hit rising inflation – but if the UK’s economy worsens, be ready to lower “fast” rates.
This brought interest rates to its lowest level since March 2023 and is the third time it has fallen this year, and the fifth time since August last year.
However, external member Mann (pictured) noted that inflation at present at 3.8% “has exceeded the four-year target, at a central bank meeting in Mexico, at a time of 2% or less in 2024.”
The Bank of England predicts inflation will rise to 4% in September driven by energy costs and food prices.
Mann added: “Britain’s GDP remains weak, with a level slightly higher than the front oval.
“Growth has averaged below 2% since the end of 2022 and is expected to remain soft for the next three years.”
Earlier this month, the economy grew 0.3% in the second quarter of this year, down from 0.7% in the first three months of the year, but it was expected to grow only 0.1%.
Mann said this combination of high inflation requires high interest rates, low growth rates, and lower interest rates. ”
The combination “makes harder work for monetary decision makers in terms of decision-making and communication,” she said.
Earlier this month, Bank of England Governor Andrew Bailey agreed with Mann, saying those who set interest rates now face “real uncertainty” as the risk of inflation exceeds its forecast and growth.
The next meeting of the committee is on September 18, with outside members expressing her intention to vote.
“The current continued persistence of bank interest rates is appropriate to maintain a tight monetary policy stance to rely on inflation to continue to exist,” Mann said.
“But if the downside risks of domestic demand start to come true, I am ready to take strong policy actions to lower tax rates with larger, faster banks.
“A radical policy strategy is needed to clearly communicate strategies about current and future policy avenues”.
