Mann's Hawkish Shift: BoE Seeks Rate Hikes Amid Inflation Uncertainty

Bank of England policymaker Catherine Mann has stated that they cannot rely on risk premia to do the work of monetary policy. According to Reuters, she argued that the bank needs to raise the bank rate. This marks a clear hawkish shift in her views, as tighter financial conditions are now seen as problematic when driven by higher inflation and policy uncertainty premia.

Mann's comments come at a time when tighter conditions are being felt across various markets. However, she emphasized that these conditions offer 'no comfort' if rooted in inflation risk and uncertainty. This suggests a preference for explicit Bank Rate increases over passive market-driven tightening.

In her speech, Mann also acknowledged that the bank may not have clearly articulated its reaction function to the recent Middle East shock. The decision not to publish a baseline forecast in April likely added to uncertainty, she noted. This has led some analysts to interpret her remarks as a desire to restore credibility and clarity, which could support expectations of more decisive future policy action.