Source: Sharecast
Speaking at a TS Lombard conference, Mann said inflation was likely to reach around 4% around the turn of the year, roughly twice the Bank’s 2% target, with the timing particularly important because it coincides with the period when many companies set wages for the year ahead.
She said demand in the economy remained positive, albeit not especially strong, while businesses were adapting to higher energy costs. However, she warned that continued above-target inflation could influence wage-setting and make price pressures harder to bring down.
Mann has voted for a 25 basis-point increase in Bank Rate at each of the past two Monetary Policy Committee meetings, in July and September. At the latest meeting, the MPC voted 6-3 to keep rates at 3.75%, with Mann among the three members favouring a rise to 4.0%.
Markets are, however, pricing in a rate increase at the Bank’s next meeting on 5 November, as policymakers weigh persistent domestic inflation against signs of weakness elsewhere in the economy.
Tuesday’s remarks build on a speech Mann gave last week, when she said the current monetary policy stance was “not sufficiently tight” and argued that policymakers could not simply rely on "policy restrictiveness coming from an upward shift in the nominal yield curve".
In that speech, Mann noted that market pricing implied more than 100 basis points of tightening over the coming 12 months, but argued that part of the rise in UK borrowing costs reflected higher risk premia rather than expectations of Bank Rate itself.
She said: "At some point, we need to follow-through with Bank Rate rises – to maintain credibility, and to avoid policy expectations repricing downwards and inflation expectations repricing further upwards."