Catherine Mann, who sits on the central bank’s rate-setting committee, also dismissed suggestions the UK could cut interest rates back ahead of the US and the Eurozone
A Bank of England policymaker has warned that financial markets are expecting “too many cuts” to interest rates this year.
Catherine Mann, a member of the bank’s rate-setting committee, also dismissed the idea that the UK could reduce interest rates before the US and the Eurozone. Just last week, Ms Mann was one of the Monetary Policy Committee members who voted to keep UK interest rates at 5.25% for the fifth time in a row.
Bank governor Andrew Bailey said that while the economy isn’t ready for lower rates yet, things are “moving in the right direction”. Currently, markets expect interest rates to drop to around 4.5% by the end of the year.
However, speaking on Bloomberg TV on Tuesday, Ms Mann advised traders not to get too excited about a series of immediate cuts to interest rates. “They’re pricing in too many cuts,” she said. “That would be my personal view, and so in some sense, I don’t have to cut because the market already is.”
She also pointed out some differences in UK inflation compared to other countries. Ms Mann added: “Wage dynamics in the UK are stronger and more persistent than the wage dynamics in either the United States or the euro area.”
“Underlying services dynamics are also stickier, more persistent than either the US or the euro area. So on that basis, it’s hard to argue that the BOE would be ahead of the other two regions, particularly the United States.”
She also pointed out that UK mortgage lenders have already cut some borrowing costs. This means there’s a bit less pressure on the Bank to quickly lower rates. After she spoke, the pound went up a little against the dollar. It rose by 0.19% to 1.266.
