BoE's Mann takes 'guarded' view on rate-cutting cycle
Bank of England rate-setter Catherine Mann said on Friday she took a "guarded" view about cutting rates, as there was still a risk inflation was becoming embedded.
The US economist, who is a member of the Monetary Policy Committee, voted on Thursday in favour of keeping the cost of borrowing unchanged at 5%.
While only one member voted for a cut, the MPC appeared to hint at further cuts to come.
But in a speech at the Central Bank Research Association in Lithuania on Friday, Mann said: "I have a guarded view on initiating a cutting cycle."
She argued that structural behaviours in the UK labour and product markets "appear to have systematically embedded inflation, such as a rise in the medium-term equilibrium rate of unemployment, catch-up bias in wages and prices, a fall in potential growth, along with the rise in the nominal neutral interest rate".
She added: "Policy therefore needs to remain restrictive for longer to purge these behaviours."
She said that amid inflation uncertainty, it was better to remain restrictive for longer and not to cut more aggressively.
Inflation has fallen well below its 11.1% peak, reached in October 2022, but remains above the BoE’s 2% target. Recent data showed the consumer price index held steady at 2.2% in August, while core inflation and services inflation both accelerated.
However, economic growth appears to have stalled, with no growth recorded for the second consecutive month in July.
Governor Andrew Bailey said on Thursday that the economy was moving "broadly as we expected" and if that continued "we should be able to reduce rates gradually over time".
"But it is vital inflation stays low, so we need to be careful not to cut too fast or by too much," he added.
The BoE trimmed rates for the first time in four years in August, by 25 basis points.