BoE Policymaker Catherine Mann Welcomes Inflation Drop but Urges Caution on Underlying Pressures

Bank of England rate setter Catherine Mann has described the latest UK inflation figures as encouraging but warned that underlying price pressures remain a concern, underscoring the central bank’s cautious approach as it weighs potential interest rate cuts.

Data released this week showed annual consumer price inflation eased to 3.0 percent, the lowest level since March last year. The decline has strengthened expectations in financial markets that the Bank of England could begin lowering borrowing costs in the coming months. However, measures of services inflation, often viewed as a gauge of domestic price pressures, remained elevated.

Speaking in a podcast interview, Mann said the headline numbers were good but acknowledged that the improvement in underlying indicators was less pronounced than policymakers had hoped. She emphasized that it remains difficult to determine whether inflation is on a sustainably lower path or whether the anticipated return toward the Bank’s 2 percent target will prove temporary.

Mann also highlighted concerns about the labour market, noting that a recent rise in the unemployment rate is significant. The Monetary Policy Committee is tasked with balancing its inflation objective against the need to support employment and economic stability. She suggested the Bank is approaching a point where policy settings may be close to equilibrium between these goals.

The Bank of England voted earlier this month to keep its benchmark interest rate unchanged in a narrow decision. Mann sided with the majority in that vote, though she indicated at the time that the moment for a rate reduction was drawing nearer if data continued to move in the right direction.

Markets have reacted quickly to the softer inflation reading. Traders are currently pricing in a high probability of a quarter point rate cut at the next Monetary Policy Committee meeting. Investors are also watching wage growth and services sector data closely, as these are seen as key drivers of persistent inflation in the UK economy.

While headline inflation has fallen from its peak during the cost of living crisis, the central bank remains wary of declaring victory too soon. Policymakers have repeatedly stressed that they need clearer evidence that price growth is returning to target on a lasting basis before easing monetary policy.

The Bank’s next decision will be closely scrutinized by households and businesses alike. Lower interest rates could provide relief to mortgage holders and support investment, but officials remain cautious about moving prematurely if inflation risks persist.

As economic indicators continue to shift, the Bank of England faces a delicate judgment on when to begin unwinding the tightening cycle that was introduced to combat the sharp surge in prices over the past two years.