Next Bank Rate decision likely to be another hike, MPC member says

Catherine L. Mann, member of the Bank of England's Monetary Policy Committee, has said the next step in Bank Rate "is still more likely to be another hike than a cut or hold".

Last week, the MPC voted to increase rates for the 10th consecutive time, to a 14-year high of 4%.

In a recent speech, Mann discussed the Committee's decision to increase rates despite inflation slowing for a second consecutive month following a peak of 11.1% in October.

Asking why the Bank decided not to pause the hiking cycle to see if inflation continues to fall, Mann said: "If inflation indeed is more persistent, then Bank Rate will need to rise again after the pause, to be followed later with reversal. In my view, a tighten-stop-tighten-loosen policy boogie looks too much like fine-tuning to be good monetary policy. It is both hard to communicate and to transmit through markets to the real economy."

She added that not all inflation components are moderating, noting that while energy prices are capped for now and goods prices are decelerating, food prices continue to surge, increasing to 16.8% in December, at a 45-year high. In addition, services inflation posted at 6.8%, a 30-year high; and it has been at or over 6% for five consecutive months.

She said that the "stabilization of headline inflation, therefore, is not yet the harbinger of a turning point towards a sustainable return to the 2% target".

Continuing, Mann said: "Uncertainty around turning points should not motivate a wait-and-see approach, as the consequences of under tightening far outweigh, in my opinion, the alternative. We need to stay the course, and in my view the next step in Bank Rate is still more likely to be another hike than a cut or hold."