Bank of England policymaker will ‘move big’ on interest rate cuts

An independent interest rate setter at the Bank of England who has consistently favoured restrictive monetary policy said on Wednesday that she is prepared to “move big” on cutting interest rates once it is clear inflation has stabilised.
Catherine Mann, an external member of the monetary policy committee (MPC), said that “when I have evidence that there has been a removal or sufficient moderation of inflation persistence, then I will move at a bigger step”.
Mann has yet to vote to lower interest rates and has often called for larger increases to the base rate as the majority of the MPC favoured slowing the pace of policy tightening.
Earlier this month, the committee voted 8-1 in favour of cutting the base rate by 25 basis points to 4.75 per cent. Policymakers started lowering borrowing costs in August with a quarter point reduction having previously raised rates to the highest level in 16 years.
Andrew Bailey, governor of the Bank of England, said this month that a “gradual approach” to bringing down interest rates is needed amid uncertainty around how the government’s first budget will influence inflation.
In new forecasts for the UK economy, the central bank said that the budget would push up inflation and growth in the short-term.
Rachel Reeves, the chancellor, lifted government spending by £70 billion a year at the budget, including £100 billion of extra public investment over the course of the parliament financed through additional borrowing.
Businesses have said that they intend to raise prices to offset higher tax bills after the chancellor increased employers’ national insurance contributions by 1.2 percentage points to 15 per cent.
According to the Office for National Statistics, inflation fell faster than anticipated, to 1.7 per cent in September from 2.2 per cent in the previous month, the lowest rate in over three years.
Mann, who was speaking on a panel of female central bankers hosted by BNP Paribas, the French bank, said she voted against the rest of the MPC in November “because, in my view, there is outside risk to inflation, already embedded potentially going forward … and in that environment it is important to hold for longer”.
Financial markets think that the Bank of England will leave borrowing costs unchanged at its next meeting on December 19.