MNI BRIEF: BOE's Dhingra Sees Risk Of Over-Tightening
BOE newcomer warns of risk of over-tightening, but views on the Monetary Policy Committee remain fragmented
Bank of England Monetary Policy Committee newcomer Swati Dhingra told lawmakers that with the UK economy already contracting "there is a risk of overtightening,” but other MPC members gave different views to the Treasury Select Committee on Wednesday.
Dhingra voted for a smaller rate hike than the majority at her first meeting in September, opting for a 25-basis-point increase, while in November she backed 50 bps rise when the MPC chose 75 bps. Her colleague, Catherine Mann, who has been at the hawkish end of the MPC, also presented evidence on the November Monetary Policy Report to the TSC, restating her case for front-loading hikes in order to bring down inflation expectations.
BOE Governor Andrew Bailey noted that even on the Bank's unchanged policy rate forecast, holding Bank Rate at its current 3%, inflation was projected to substantially undershoot the 2% target towards the end of the 3-year forecast horizon, reaching just 0.84%. Bailey said that the key upside risk to this forecast was "the very tight labour market", with labour shortages being passed on into higher wages. (See MNI POLICY: BOE Points To 4% Peak At Most, Then Rate Cuts)