BOE MPC’s Mann: Data Suggests Trade-Off In Terms Of Rising Inflation vs. Deteriorating Earnings

catherine mann

BOES Catherine Mann

This is Catherine Mann, a member of the BOE MPC. . She says:

  • earnings data suggest a growing trade-off in terms of rising and persistent inflation versus deteriorating real earnings
  • UK exposure and sensitivity to global spillovers could exasperate offsetting inflationary activity
  • incoming data in inflation
  • offsetting factors significantly and increasingly likely to support consumer spending in the near term
  • sound policy would reduce the risk of built-in domestic inflation being further boosted by imported inflation through a depreciating pound sterling
  • domestic situation is characterized by very high inflation
  • if the Fed tightens at the rate currently expected, and the ECB manages to raise soon, the scenarios outlined above suggest additional depreciation pressure on the British pound
  • Given the likely double-digit inflation, it is particularly relevant to consider the short-term implications of global factors for inflation.
  • a 50 basis point move reduces the risk of domestic inflation being boosted by a weaker sterling
  • I open the door to a reversal of the policy rate in the medium term when the internal supports for demand fade and when the weakness in external sources of demand bites.
  • For the UK, the data shows that the US tightening has been inflationary rather than disinflationary.
  • it is important to react in a timely manner to a US monetary policy shock that causes the UK price level to skyrocket

At the recent June meeting last week, MPC members Mann, Jonathan Haskel and Michael Saunders voted for a larger 50 basis point increase.

GBPUSD has risen modestly in today’s trade but found resistance against its 200 hourly moving average currently at 1.2277, current price is trading at 1.2236.

Looking at the hourly chart, that is just above the 38.2% retracement 1.2213. Below that and the 100 hourly moving average 1.21729 would be the target. That’s close to Friday’s trading low.

GBPUSD

GBPUSD is trading between its 200 and 100 hourly moving averages

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