A member of the monetary policy committee argues for additional rate hikes just days after the Bank indicated that its key interest rate is nearing its maximum.
A member of the Bank of England committee that determines the Bank rate urged her colleagues to remain steadfast in the fight against inflation, expressing concern over the possibility of a “policy boogie” in the future.
Catherine Mann, an external member of the Federal Reserve’s nine-member monetary policy committee (MPC), argued in a lecture in Hungary that a delay in interest rate hikes would be more detrimental.
She voted in favor of the 0.5% increase to 4% that was announced last Thursday – the tenth straight increase imposed by the MPC to curb inflationary pressures in the UK.
Nonetheless, the committee indicated that the Bank rate was nearing its top, with two members voting against any change.
Bank of England rate-setter wants more hikes
Ms. Mann warned her Budapest audience that the danger of insufficiently tightening policy was significantly greater than the alternative.
“We must stay the path, and the next Bank rate move is still more likely to be an increase than a cut or a hold, in my opinion.
“In my opinion, a tighten-stop-tighten-loosen policy dance resembles fine-tuning too much to be effective monetary policy.
“It is both difficult to convey and to transmit through markets to the real economy,” she continued, noting that wage and price inflation remained excessively high.
The so-called doves who advocate for no rate hikes believe that over-tightening risks trigger an unduly severe economic slump, with higher rates in the economy reducing demand for borrowing and putting additional costs on mortgage holders who watch the Bank rate.
Recent forecasts by the International Monetary Fund indicate that the United Kingdom will perform worse than any other industrialized country this year due to persistently high energy costs and reduced government investment.
Economists and Bank of England officials predict that inflation will fall dramatically this year; nevertheless, although the headline rate falls, probably, the impact of the cost of the living problem on living standards will take much longer to abate.
