BoE's Mann ready to hike rates if inflation outlook worsens

Bank of England policymaker Catherine Mann stated on Thursday that she is ready to vote for an interest rate increase if inflation expectations rise, particularly in the context of the U.S.-Iran conflict. Mann indicated that while current market conditions have somewhat offset inflationary pressures, she will closely monitor how rising inflation impacts wage negotiations for 2027.

In a speech text released by the BoE, Mann explained that if inflation outturns, especially expectations, are unfavorable to the underlying inflation process, an 'activist move' could help bring inflation expectations and outcomes toward the 2% target. She noted that the BoE's own forecast for inflation later this year has been trimmed to just above 3.25%, down from previous predictions of 3.6%-3.7%. A BoE survey revealed that public inflation expectations reached a record high in May.

Mann mentioned that she had previously held off voting for a rate rise because the Iran war had pushed up market interest rates in Britain. However, she emphasized the importance of data outturns, including one-year-ahead inflation expectations, in the latter half of the year for her future decisions. She also observed that labor market data suggests a less weak picture than the headline unemployment rate of 4.9% might imply. Additionally, Mann noted that fiscal surprises could influence the outlook for rates, referencing potential looser budget policies from a future government.