Bank of England’s Mann warns inflation risks becoming entrenched

A warning about wage settlements

Bank of England policymaker Catherine Mann warned on Tuesday that above-target inflation had become embedded in the British economy, according to Reuters and Bloomberg reports of her remarks at a TS Lombard conference in London. She highlighted the risk that price growth around the turn of the year could influence wage negotiations and prolong inflationary pressure.

Why she remains concerned

Bloomberg reports that Mann described a labour market with limited hiring and firing, rather than enough spare capacity to contain wage growth. She also noted that businesses investing in alternative energy sources could reduce their exposure to future energy-price shocks. These are her assessments of the economic outlook, not established outcomes.

No new rate decision

Reuters reports that Mann has been among the minority of Monetary Policy Committee members favouring a quarter-point increase to 4%. Tuesday’s remarks do not announce a new Bank Rate decision. A warning about future inflation should not be read as confirmation that a particular rate increase will occur.