Markets pricing too many UK rate cuts, says Catherine Mann
By Michele Maatouk
Date: Tuesday 26 Mar 2024
(Sharecast News) - Bank of England policy maker Catherine Mann said on Tuesday that financial markets are pricing in too many interest rate cuts this year and that it's unlikely the UK will move before the Federal Reserve.
Markets are currently expecting three quarter-point rate cuts this year, starting in August.
"They're pricing in too many cuts - that would be my personal view - and so in some sense, I don't have to cut because the market already is," Mann said in an interview with Bloomberg TV.
"Wage dynamics in the UK are stronger and more persistent than the wage dynamics in either the United States or the euro area," she said. "Underlying services dynamics are also stickier more persistent than either the US or the euro area. So on that basis, it's hard to argue that the BOE would be ahead of the other two regions particularly the United States."
Explaining her decision last week to change her vote from raising rates to holding policy at 5.25%, Mann pointed to changing dynamics in the labour market.
She said there's now more evidence of people seeking additional jobs to repair falling living standards, but employers are more reluctant to hire. She added that discretionary spending on services, like hotels, restaurants and entertainment, is also shrinking.
"There has been a substantial easing, even since the vote last week," she said about market rates, signalling that the markets are pricing into many cuts.
"I think that perhaps markets are a bit too complacent about how long they think the BOE overall - the MPC - will hold rates."
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