Bank of England's Mann says weak pound makes case for big rate hike

THE Bank of England (BOE) should raise rates faster than it has done so far because weakness in the value of the pound is adding to inflation pressures in Britain, interest-rate setter Catherine Mann said on Monday (Jun 20).

"In my view, a more robust policy move ... reduces the risk that domestic inflation already embedded is further boosted by inflation imported via a sterling depreciation," Mann said in a speech at an event organised by MNI Market News.

The BOE raised its benchmark interest rate by a further 25 basis points to 1.25 per cent last Thursday and said it was ready to act "forcefully" if needed to stamp out dangers posed by inflation.

Mann and 2 other members of the 9-strong Monetary Policy Committee voted for a 50 basis-point rise.

In her speech on Monday, Mann said there were signs that the jump in inflation in Britain - which hit a 40-year of 9.0 per cent in April - was becoming more embedded and persistent, and had more momentum after government support measures for households.

Rate hikes by the US Federal Reserve and the European Central Bank would lead to more downward pressure on sterling which would add to inflation pressures.

"I open the door to a policy rate reversal in the medium term when the domestic supports to demand fade and when weakness in external sources of demand bite," she said. REUTERS