Bank of England may accelerate rate hike
2023.02.06 08:06
Bank of England may accelerate rate hike
By Tiffany Smith
Budrigannews.com – On Monday, rate-setter Catherine Mann of the Bank of England supported further interest rate increases and warned that pausing, as some of her colleagues advocate, could result in a confusing “policy boogie” if rates were to need to rise once more.
The BoE’s Monetary Policy Committee (MPC) indicated that it was close to suspending a run of interest rate increases that began in December 2021 after raising them to 4% last week.
Mann, who has always been the MPC member who is most hawkish, said that the risk of not tightening policy enough was much worse than the alternative.
Mann stated in a speech to the Lamfalussy Lectures Conference in Budapest, “We need to stay the course, and in my view the next step in Bank Rate is still more likely to be another hike than a cut or hold.”
She criticized the idea of pausing the rate hike cycle at this point, which was supported by two of her MPC colleagues, Silvana Tenreyro and Swathi Dhingra, last week.
“I believe that a tighten-stop-tighten-loosen policy boogie is not good monetary policy because it looks too much like fine-tuning. Mann stated, “It is difficult to communicate and transmit through markets to the real economy.”
Mann stated that the inflation outlook posed upside risks.
She stated, “Because wage and price inflation are still so high, monetary policy must lean against these upside biases from a risk-management perspective.”
Dhingra and Tenreyro, on the other side of the MPC spectrum, contend that, with the BoE’s rate hikes yet to fully take effect, excessive tightening could lead to an unnecessary recession in the UK economy.
Inflation is expected to fall far below the 2% target in the coming years, according to the BoE’s own projections.
Huw Pill, the Chief Economist of the BoE and one of the MPC’s more centrist members, said on Friday that it was important not to raise borrowing costs too much.
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