MPC member hints at further rate rises as cost of living pressures increase

During a Bank of England webinar, Mann said that "monetary policy needs to keep inflation expectations anchored; by doing so now, less tightening will be required later, when demand may still be weak".

Mann voted for a 50 basis point hike in Bank Rate during the Monetary Policy Committee's February meeting and a 25bp rise in March.

Discussing why she voted for a larger rate increase, Mann said that surveys reported continued strengthening of wage and price increases, "which could generate a domestically-driven wage-price dynamic with higher inflation embedded in forward-looking pricing decisions".

Explaining the current situation in the UK economy, Mann said: "The economy – firms, workers, consumers – is confronted by repeated shocks on the same side – Brexit, Covid, supply bottlenecks, energy prices – that on balance increase the prices of goods and services in the UK. Over the past year, these shocks have caused the price level to ratchet up and rather than letting each shock die out with inflation returning to target, they have piled on top of each other increasing inflation to historic highs."

She continued: "Unfortunately, more modest price outcomes for some products will not bring headline inflation near to target for 2022 or even for most of 2023 because the energy price shock is so large and the mechanism of the Ofgem price cap could drag it out.

"The challenge is to deploy monetary policy tools to short-circuit the inflationary expectations dynamic now, so as to prevent inflation from remaining above target for longer, and by doing so to moderate the hit to purchasing power later on."