MNI BRIEF: BOE Forecasts Over Estimate Tightening Impact- Mann

The Bank of England's central economic projections underestimate the impact of the tightening that the Monetary Policy Committee has carried out to date and inflation has proven stickier than expected, MPC member Catherine Mann said Monday.

Speaking at a Redburn Atlantic event Mann argued that policymakers should not take the risk of assuming that inflation expectations are well anchored and should err on the side of tighter policy. Mann has repeatedly pushed for higher interest rates in her time on the MPC and she argued that the Bank models have overestimated how restrictive policy has been, with the long-run neutral rate driven up in part by UK inflation premia.

Our model "underestimates. the stickiness of inflation. The forecast over-estimates the amount and the effects of the monetary policy tightening to date, " Mann said, adding in a Q and A that the impact of tightening in the US was larger than in the UK. She said that UK "households are in pretty good shape," downplaying the financial stability risks from policy tightening.