BOE's Mann: Looser financial conditions since June factor into rate vote

BoE policymaker Catherine Mann said the loosening of financial conditions since the June meeting will shape her vote on rates, reiterating a hawkish stance that sees greater upside risks to inflation than downside risks to activity.

At the June policy meeting, Mann saw inflation risks tilted to the upside. She favored a longer period of restrictive policy, with additional tightening on the table if needed to contain persistent inflation, according to remarks released earlier today.

Mann argued that the easing of financial conditions since June reduces the effectiveness of the BoE's current restrictive stance. Incoming data in the second half will be critical to determine whether inflation pressures are becoming entrenched, she said. Fiscal policy also has a role in returning inflation to the 2% target.

On the labour market, Mann noted resilience in some sectors that runs stronger than the headline unemployment rate suggests. Both short- and long-term inflation expectations remain elevated, reinforcing her concern that persistence is a meaningful risk.

The hawkish lean sets the UK apart from the ECB, which cut rates in June, and the Fed, which has kept rates steady. The pound has strengthened against the dollar and the euro since the BoE's June meeting, partly reflecting a repricing of UK rate expectations. Mann's vote adds weight to the hawkish wing of the Monetary Policy Committee. Her emphasis on financial conditions suggests she will watch market-implied rates and credit spreads closely.

For sterling, the BoE's relative hawkishness supports the pound through the rate-differential channel, though the broader dollar environment and risk appetite also move the pair. GBP/USD has traded near recent highs, with momentum tied to the spread between UK and US two-year swap rates, which has widened in the pound's favour.

UK CPI and average weekly earnings data due before the BoE's next policy decision in August will shape the debate on the committee. Mann said the balance of risks has shifted her toward a longer period of restraint. The summer data will test that view.