Catherine L. Mann highlights how disaggregated data can improve our understanding of trends in headline economic variables. She also examines how volatility in inflation and financial markets has influenced financial conditions. Catherine then explains how research about de-anchoring of inflation expectations and the speed of monetary policy transmission has underpinned her activist policy strategy.
Catherine L. Mann
Member of the Monetary Policy
Speech
Introduction
As I think about my recent policy decisions, my assessment has evolved with incoming data and ongoing research. At the start of this year, moderation in price and wage growth, alongside slowing activity, had brought me closer to considering a reduction in Bank Rate. However, since the onset of the conflict in the Middle East, the reemergence of the trade‑off between inflation and activity has led me to place more weight on inflation persistence, shifting my view towards a longer hold, and potentially a need to lean against that risk.
This remains my view, as notwithstanding a sporadic reopening of the Strait of Hormuz, infrastructure rebuilding, future-proofing, and restocking supplies imply that higher energy prices will likely persist. Associated firm pricing reactions are also likely to keep inflation from moderating to the two percent target within the monetary policy horizon. That said, the discussion for today addresses the timing of a hike versus hold decision. The first topic is how an assessment of disaggregated data provides important nuances to the economic picture relative to the headline numbers. The second topic is how key research findings for both inflation persistence and monetary policy transmission inform my policy strategy.
Click here for full details.
