BoE’s Mann warns of overestimated rate cuts

Financial markets might be overly optimistic about the number of interest rate cuts anticipated this year, said Catherine Mann of the Bank of England (BoE)’s Monetary Policy Committee, who voiced her concerns to Bloomberg on Tuesday.

Speaking to Bloomberg TV, Mann suggested that the current market pricing, which almost fully anticipates three quarter-point rate cuts by the BoE, might be excessive.

Mann, who last week aligned with the majority decision to maintain the bank rate at 5.25 per cent, the highest level since 2008, had previously advocated for a rate increase to 5.5 per cent.

She attributed her shift in stance to a change in consumer behaviour, noting a growing reluctance to accept higher prices, particularly in the hospitality and travel sectors, and observing that businesses were reducing worker hours.

She also pointed out that the market dynamics, including the mortgage rates influenced by the market curve, are effectively doing the bank’s job of adjusting rates, as these are the rates that borrowers actually encounter, unlike the bank rate itself.