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Companies will have difficulty increasing prices this year because consumers are ejected from loss of jobs and expenses, according to a Bank of England tariff replacement, which argues that the central bank should have reduced the interest rates more aggressive last week.
Catherine Mann said that she voted for a Jumbo half-point cut last week because a weaker job market and a slowdown with consumer demand that dampens the pricing of the companies and thus the inflation pressure.
Mann was previously the Hawkish politician of the BoE and against the reduction in installments of last year due to persistent inflation risks.
“The demand conditions are a little weaker than the case – and I have changed my opinion about it,” said Mann in an interview With the financial times.
“I can come very close to (2 percent) target (level) in the coming year,” she added and warned that the data indicates a “non -linear” drop in employment.
Mann, an external member of the Boe money committee, distanced himself from the “gradual” approach to reducing the central bank and said that half a dot change is necessary easier financial conditions.
“In my view, to the extent that we can communicate what we are for the corresponding financial conditions for the British economy, a greater step in my view is a superior communication device,” said Mann.
The Boe announced a quarter-point reduction to 4.5 percent on Thursday, but men and her colleague Swati Dhingra both demanded a larger half point.
Huw Pill, the chief economist of the Boe, distanced himself from this approach on Friday and said that he would not “rush” into considerable installments.
While Dhingra has been looking for a quick relaxation than the majority of the MPC for some time, Mann was at the opposite end of the spectrum until recently.
In 2023, she demanded interest rates to 5.5 percent, a quarter point above the climax after the inflation boost.
She rejected the decision of the MPC majority to switch the hit rate to 5 percent in August, and was the only opponent of the November parade to reduce it to 4.75 percent.
Despite her change of posture, Mann warned that her voice was reflected in the last week for a unique level and not a long -term episode of the ongoing installment reductions.
In the second half of this year, the Boe expects an inflation of consumer prices to 3.7 percent to 3.7 percent, which is due to factors such as higher energy prices.
Mann said that the central bank had to ensure that this increase did not lead to companies agreed to accept higher wage requirements, which could boost inflation.
“I have to make sure that these effects of the second round do not appear. And I will need further data to make this judgment, ”said Mann.
Nevertheless, Mann said that she expects a weakening British consumer to lead to “lack of price performance”.
The conditions for the soft demand begin to “bite” and undermine the capacity of the companies in order to pursue the cost increases in areas such as catering, hospitality and public holidays, she said.
Companies whose labor costs were probably driven by the government’s decision to increase the minimum wage and the employer national insurance contributions have now shown “dramatically changed” employment intentions.
This pointed out “non -linear adjustments in work needs”, she said. “Employees may want to pay these wage increases, but companies will not be able to pay because they cannot give it through.”
Mann added: “If there is a non -linear job adjustment that causes less demand because fewer people are employed. And then this leads to the moderating price -performance of companies. “
The weaker demand reflected the persistent caution among consumers despite increasing real incomes, with the inflation -adjusted wages rose by 2.5 percent in September to November of the previous year.
Last year man said that she suggested that high savings were “dry powder”, which could feed more consumption, but not.
A monthly survey by KPMG and the Recruitment & Employment Confederation on Monday pointed out to the The most widespread weakening Asked since August 2020 when the United Kingdom deals with the Covid pandemic.
