Catherine Mann stresses the need for cautious monetary policy, suggesting over-tightening may be preferable to ‘embedding’ inflation.
Catherine Mann, a key member of the Bank of England’s Monetary Policy Committee (MPC), has warned that pausing interest rate hikes could risk “embedding” inflation within the UK economy, urging the need for continued vigilance in monetary policy. Mann, known for her more hawkish stance, stated that she would prefer to “err on the side of over-tightening” rather than halting rate hikes too soon.
In her comments, Mann stressed that inflation remains a significant threat to the economy, despite recent efforts to bring it down. While some members of the MPC have suggested that the current level of interest rates may be sufficient to control inflation, Mann’s remarks highlight the risks of prematurely pausing or reversing the tightening measures.
“We are not out of the woods yet,” Mann remarked, emphasising the importance of keeping inflation expectations anchored. “If we pause too early, inflation could become entrenched, and that would be detrimental in the long run. We must continue to monitor the data closely and be prepared to act accordingly.”
Her statement comes amid growing concerns about the broader economic impact of rising interest rates, with many businesses and consumers feeling the strain of higher borrowing costs. However, Mann’s view is that inflationary pressures, particularly in services and wage growth, remain a critical concern that could outweigh short-term economic pain.
The Bank of England has already implemented several rate hikes in an effort to curb inflation, but inflation has remained above target for much longer than anticipated. While some economists argue that the risks of over-tightening could hurt economic growth, Mann’s comments reflect the bank’s cautious approach in ensuring that inflationary pressures do not become deeply ingrained.
As the MPC continues to assess economic data, Mann’s stance is likely to influence the ongoing debate within the committee about the future course of monetary policy. Whether the Bank will proceed with further rate increases or hold steady will depend on how inflation and economic conditions evolve in the coming months.
