MNI BRIEF: Terminal Rate Higher Than BOE MPC Assumed - Mann
MNI (LONDON) - The Bank of England's terminal policy rate was clearly above where the Bank's models had assumed that it would be and that policy has not been as restrictive as previously thought, Monetary Policy Committee member Catherine Mann said Thursday.
Looking at the "underlying models that we run our forecast off of the terminal rate was last calculated in 2018, at 2.25 nominal ...my view is it's definitely higher than that," Mann said at a Brown Brothers Harriman event, noting the market curve has it just under 4%. Market curves have been assuming around a 100 basis points of cuts over the next 12 months but Mann said 100 bps of easing "would not be consistent." with her views.
Mann opposed the first two 25bps rate cuts this cycle, which lowered the policy rate to 4.75%, and she restated her belief in policy activism saying that while "our inflation rate has decelerated quite a bit" the BOE should hold for longer in order to purge the structural higher inflation elements and "when I decide to make an adjustment I will make a larger change in Bank Rate."