Bank policymaker calls for faster rate rises to prevent weak pound fuelling inflation
The Bank of England should raise interest rates more aggressively to shore up the weak pound, according to one of the central bank’s policymakers, who warned that sterling’s depreciation was fuelling inflation from higher import costs.
In a hard-hitting speech, Catherine Mann said the nine-strong monetary policy committee, which she joined last year, was in danger of falling behind rival central banks that were taking a more energetic approach to tackling inflationary pressures.
Mann, who voted for 0.5% increase in the Bank’s base rate at a meeting last week, said she was most concerned about the signal from the US Federal Reserve that it planned to raise rates several times after a 0.75% increase earlier this month.
The former investment bank economist said the UK was vulnerable to financial flows that seek out countries with the highest interest rates. Funds could depart the UK for the US in search of of higher interest rates unless the Bank’s plans for higher rates kept pace.
“In my view, a more robust policy move… reduces the risk that domestic inflation already embedded is further boosted by inflation imported via a sterling depreciation,” Mann said in a speech at an event organised by MNI Market News.
The Bank raised its benchmark interest rate by 0.25 percentage points to 1.25% last Thursday and said it was ready to act “forcefully” if needed to stamp out dangers posed by inflation.
Mann and two other members of the nine-strong Monetary Policy Committee voted for a 0.50 percentage point rise.
In the past the Bank had taken a cautious approach to raising rates and resisted cutting them quickly when lower borrowing costs were needed to support he economy, she said.
The current crisis has demanded a more aggressive stance to
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