Bank policymaker warns of inflation risks and calls for higher rates

Catherine Mann, a member of the Bank of England's rate-setting committee, expressed concerns regarding inflation risks during a recent conference in Lithuania. She emphasized the need for higher interest rates to address these risks, particularly in the services sector, which has shown persistent inflation. Mann's remarks followed the Bank's decision to maintain the UK base rate at 5%, after a previous cut from 5.25%. Governor Andrew Bailey highlighted the importance of keeping inflation low, indicating a cautious approach to future rate adjustments. Mann, known for her hawkish stance, pointed out that structural factors could lead to prolonged inflation above the official 2% target. She noted that many households are feeling the financial strain due to rising housing costs, which disproportionately affect middle-income earners. This situation has resulted in a weakened consumer base, raising concerns about the overall economic health. Despite contemplating a rate cut in August due to the increasing burden of housing expenses, Mann ultimately voted to keep rates unchanged. She argued that maintaining a restrictive policy is essential to mitigate inflationary pressures and prevent further economic stagnation. Her insights reflect a broader concern among policymakers about the sustainability of the UK economy in the face of rising costs. In conclusion, Mann's statements underscore the delicate balance the Bank of England must strike between supporting economic growth and controlling inflation. The committee's cautious approach aims to ensure that inflation remains manageable while addressing the challenges faced by consumers in the current economic climate.