Bank of England’s Mann confident UK inflation under control

By David Milliken

LONDON (Reuters) -British households, businesses and financial markets remain confident that the Bank of England will return inflation to its 2% target, BoE policymaker Catherine Mann said, after official data on Wednesday showed inflation at a 10-year high.

BoE Governor Andrew Bailey said on Monday that he had been concerned last month that markets might lose faith in the BoE’s commitment to fighting inflation as prices rose, which in turn had prompted him to signal a rate rise was coming.

The BoE did not raise rates at its November meeting, wrong-footing investors who thought Bailey had implied a rate rise was imminent. But financial markets expect rates to rise next month, after strong jobs data and a jump in inflation to 4.2%.

Mann, who joined the BoE’s Monetary Policy Committee in September, told an online event hosted by J.P. Morgan that she expected higher inflation to be temporary.

Rising rates of pay for newly-hired staff, especially junior roles, were not feeding through into across-the-board pay rises for existing employees, she said.

Moreover, rising costs for essentials such as energy and food were likely to reduce other businesses’ ability to charge consumers more for goods and services next year.

Medium-term inflation expectations, as measured through financial instruments and surveys of households and businesses, were consistent with inflation returning to 2%, she added.

“We feel confident that they believe that the Bank of England can and will – those are important ingredients right, can and will – undertake the appropriate policy response to bring inflation back to 2%,” Mann said.

Mann voted with the majority this month to keep interest rates at 0.1%, but was part of a minority who wanted an early end to the BoE’s 875 billion pounds ($1.18 trillion) of government bond purchases, which are due to stop in December.

($1 = 0.7411 pounds)

(Reporting by David Milliken Editing by William Schomberg and Alexander Smith)

By David Milliken

LONDON (Reuters) -British households, businesses and financial markets remain confident that the Bank of England will return inflation to its 2% target, BoE policymaker Catherine Mann said, after official data on Wednesday showed inflation at a 10-year high.

BoE Governor Andrew Bailey said on Monday that he had been concerned last month that markets might lose faith in the BoE’s commitment to fighting inflation as prices rose, which in turn had prompted him to signal a rate rise was coming.

The BoE did not raise rates at its November meeting, wrong-footing investors who thought Bailey had implied a rate rise was imminent. But financial markets expect rates to rise next month, after strong jobs data and a jump in inflation to 4.2%.

Mann, who joined the BoE’s Monetary Policy Committee in September, told an online event hosted by J.P. Morgan that she expected higher inflation to be temporary.

Rising rates of pay for newly-hired staff, especially junior roles, were not feeding through into across-the-board pay rises for existing employees, she said.

Moreover, rising costs for essentials such as energy and food were likely to reduce other businesses’ ability to charge consumers more for goods and services next year.

Medium-term inflation expectations, as measured through financial instruments and surveys of households and businesses, were consistent with inflation returning to 2%, she added.

“We feel confident that they believe that the Bank of England can and will – those are important ingredients right, can and will – undertake the appropriate policy response to bring inflation back to 2%,” Mann said.

Mann voted with the majority this month to keep interest rates at 0.1%, but was part of a minority who wanted an early end to the BoE’s 875 billion pounds ($1.18 trillion) of government bond purchases, which are due to stop in December.

($1 = 0.7411 pounds)

(Reporting by David Milliken Editing by William Schomberg and Alexander Smith)