BoE's Mann says wage growth still a concern for inflation - report

12th Aug 2024 07:31

(Sharecast News) - Catherine Mann, an external member of the Bank of England's monetary policy committee, has said the UK should not be "seduced" into thinking the battle against inflation is over after a short-term drop in the headline measure targeted by the Bank.

In an Economics Show podcast with the Financial Times, Mann said she was still concerned about upside risks to inflation despite the main rate remaining at the bank's 2% target in June.

Goods and services prices were set to rise again, Mann said, and wage pressures in the economy could take years to dissipate.

She told the FT that survey evidence suggested companies were still expecting to make relatively big increases to both wages and prices, and "that says to me right now I'm looking at a problem for next year".

In the latest round of annual pay deals, "some people at the bottom got quite a bit of an increase, rightfully so, but the ones above them didn't," she said.

Which means next year they will, she argued. In a similar fashion, companies often watched their rivals raise prices and followed suit, Mann added.

She said "there is an upwards ratchet to both the wage setting process and the price process and . . . it may well be structural, having been created during this period of very high inflation over the last couple of years.

"That ratchet up will take a long time to erode away."