Mann Cites Errors in BoE's Iran War Response

Bank of England interest rate-setter Catherine Mann said her institution made mistakes in how it handled its policy response to the Iran war shock. The UK central bank raised market interest rates after the outbreak, which some Monetary Policy Committee members believe helped curb inflation. However, Mann claimed that this rise actually reflected increased expectations of higher inflation and a 'monetary policy uncertainty premium'. This risk premium was due to errors in the central bank's initial framing of its policy response, according to Mann.

The Iran war had caused market fluctuations, which led to an increase in borrowing costs in the UK. Mann stated that this rise should not be seen as beneficial for officials. She emphasized that the increased interest rates were a result of uncertainty surrounding monetary policy, rather than any actual effect on inflation.