BOE Official: Central Bank's Initial Response to Iran War Shock Was Misguided

Bank of England interest rate-setter Catherine Mann stated that the central bank made errors in its initial response to the shock from the Middle East war, which led to higher borrowing costs in the UK.

Mann claimed that the rise in market interest rates after the Iran war reflected expectations of higher inflation and possibly a 'monetary policy uncertainty premium.'

This risk premium was attributed to perceived errors in the BOE's initial response in March, where it held interest rates with a message seen as 'wait mode' rather than taking necessary action to control inflation.

Mann pointed out that higher interest rates being paid by borrowers may just be a reflection of expectations of higher inflation, and not contributing much to slowing future price growth.