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Mann asked what would change her mind

BOE
  • Mann asked what would change her mind. Says she has spent a lot of time looking at goods vs services. Find that goods are about on track to return to close to target-consistent behaviour. Services it is much less clear that inflation will return to target within the forecast horizon and so the work that matters the most is to see a durable deceleration in the price setting sector. Durable meaning not good enough to only have a couple of data points - "durable means more than a few."
  • When pushed, she says the micro data has 6 months of deceleration in the share of prices decreasing, but that share is too high. That is in the micro data which has not yet been fully reflected in the macro data. Plus we get back to the point that it takes a long time to get from where we are now to 3.5% which is service CPI's historic average. If goods doesn't get back to its historic average, which is zero, services will have to fall further. That is why I focus on the gap between services and goods because that gap is persistent for decades. That gap and how it evolves is the key ingredient for me. Right now the evolution in narrowing the gap when we look at services, the evolution in the narrowing of the gap is very slow.
  • When asked on whether that is to change her mind to a hold or a cut, Mann says a durable reduction in services inflation will get me from step 1 to step 2. Then it's unclear to me what the constellation would be to take me to the next step. When I did the "Turning Points" speech, I ended up by saying it was not good monpol to "boogie dance" meaning change up, change down in response to incoming data. I don't want to do that.
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