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High inflation is bad for UK productivity – BoE’s Mann
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LONDON (Reuters) – Britain’s very high inflation risks distracting
LONDON (Reuters) – Britain’s very high inflation risks distracting businesses from the longer-term decisions needed to boost ailing productivity, Bank of England policymaker Catherine Mann said in a podcast released on Thursday.
Mann repeatedly called for half-point increases in the BoE’s main interest rate before a majority of the Monetary Policy Committee backed one last month, when official data showed consumer price inflation had hit a 40-year high of 10.1%.
Speaking with academics about Britain’s productivity – which lags the United States, Germany and France in output per hour worked – Mann said the current surge in inflation would force businesses to focus on short-term pricing decisions instead.
“Very high inflation, which of course we are experiencing right now, has many downside consequences,” she said.
“In a high-inflation environment, firms are scrambling to figure out what their best pricing strategy is. Productivity, on the other hand, comes when firms are focusing their attention on their products, their people, their investment choices and their global and domestic market opportunities,” she added.
The BoE will release its next interest rate decision on Sept. 15, when financial markets expect the central bank to raise interest rates to 2.25% from 1.75%.
Mann was speaking on a podcast produced as part of a series by The Productivity Institute, an academic forum funded by Britain’s Economic and Social Research Council.
(Reporting by David Milliken; editing by William James)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to keep the economy running smoothly.
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic goals such as controlling inflation, consumption, growth, and liquidity.
Productivity measures how efficiently goods and services are produced, typically calculated as the ratio of outputs to inputs in the production process. Higher productivity indicates more efficient use of resources.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by central bank policies and economic conditions.
The Bank of England is the central bank of the United Kingdom, responsible for issuing currency, managing monetary policy, and ensuring financial stability in the economy.
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