carl
A Monetary Policy Committee (MPC) member emphasized today that the markets are overly optimistic about the number of interest rate cuts the Bank of England anticipates this year. Following the recent decision, traders predict three rate cuts within the year, with the initial cut likely in June.
In an interview with Bloomberg TV, Catherine Mann expressed that the markets’ expectations were too high. “They’re expecting too many cuts — that’s my personal view — so in a way, there’s no need for me to advocate for a cut because the market has already factored it in,” she stated.
Mann has consistently been one of the more cautious members of the MPC, frequently highlighting the risks associated with persistent inflation. Despite her vote to maintain rates last week, she had previously advocated for additional rate hikes to control inflation. In February, she was among the two members of the nine-strong MPC who supported a rate hike.
Mann explained that shifts in labour market dynamics significantly influenced her decision to hold her vote, but she emphasized the necessity of more evidence before considering rate cuts.
“Wage dynamics in the UK exhibit greater strength and persistence than those in the United States or the euro area,” she noted. “Moreover, underlying service dynamics demonstrate a stickier and more persistent nature than in the US or the euro area. Therefore, it’s challenging to argue that the Bank of England should be ahead of the other regions, particularly the United States,” she added.
The Bank maintained interest rates for the fifth consecutive meeting last week. Market interpretation of the decision leaned towards dovishness due to the cessation of calls for further rate hikes by Mann and Jonathan Haskel, the two members with more hawkish views.
Andrew Bailey’s post-decision remarks suggested a more favourable stance toward rate cuts than Mann’s. “What we are observing is promising to me,” he remarked.
