BOE’s Mann Says UK Interest Rates May Remain Permanently Higher

(Bloomberg) -- Bank of England rate-setter Catherine Mann warned against letting up in the fight against inflation as she disparaged the central bank's forecasts and predicted permanently higher interest rates.

Mann, who is seen as the most hawkish rate-setter on the Monetary Policy Committee, said that interest rates have only just reached restrictive territory after the BOE halted its hiking cycle last month.

“I believe the Monetary Policy Report forecast for a long time has been telling a story fundamentally different from the ones that I consider likely,” she said Monday at an event hosted by Redburn Atlantic and Rothschild. “My story has been one of more resilient domestic demand and more persistent price pressures, which therefore requires a more restrictive monetary policy stance.”

The comments explain why Mann has been consistently voting for more aggressive tightening and leave the implication that she may support more rate rises in the coming months. 

Mann was outvoted last month when she backed continuing interest rate rises to stamp out sticky inflation. Following the decision at the September meeting to hold rates at 5.25%, Mann signaled that she wanted more hikes by calling on officials to “err on the side of tightening further.”

On Monday she reiterated that stance, saying that her own inflation forecast is at the upper end of the BOE's fan charts showing its range of inflation projections. “I am a hawk,” she said in a speech reiterating her warnings of inflation persistence.

“The data that we have seen over the past half year or so has led me to believe that my story was and is a useful story and so my votes, as being hawkish have reflected that,” she said. Mann also pointed to recent revised data showing the UK economy has enjoyed a much stronger recovery than official statistics had suggested.

Mann said that policy makers are facing a “world where inflation shocks are likely to be more frequent” with stronger price growth meaning interest rates will need to be permanently higher.

“We could say indeed, monetary policy is restrictive, but only very recently has it gotten to be that case,” she said.

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