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The Bank of England's most hawkish official: The labor market is "stationary" rather than loose, and inflation is deeply entrenched.

The Bank of England's most hawkish official: The labor market is "stationary" rather than loose, and inflation is deeply entrenched.

智通财经智通财经2026/10/06 12:25
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The Bank of England hawkish official Mann stated that the labor market is "static" rather than loose, and warned that inflation is deeply entrenched; rising fuel and energy prices may cause inflation to "significantly exceed 4%" early next year.

According to Jinse Finance APP, Bank of England rate-setter Catherine Mann stated that the labor market is "static" rather than loose, while warning that inflationary pressures are becoming entrenched.

On Tuesday, Mann said she is concerned about upcoming wage negotiations as the Bank of England expects continuously rising fuel and energy costs to push inflation to "significantly above" 4% early next year.

Although some Bank of England officials have taken some comfort from the weak labor market, believing it will help contain wage growth, Mann is less reassured. She noted that the UK is in an environment of "low hiring and low firing."

Speaking at a TS Lombard capital markets event in London, she said, "I don't see this as a loose labor market; I see it as somewhat static." "Any slack comes from new entrants to the labor market, and I don’t think there are enough of them to really turn it into a loose labor market."

Mann is one of the most hawkish members of the Monetary Policy Committee and has consistently argued for the need to raise interest rates to stop the energy shock from spreading more broadly throughout the economy. Although last month she was among a minority supporting an immediate rate hike, since then more officials have hinted that the longer the Middle East conflict lasts, the harder it will be to avoid further hikes.

The Bank of England is trying to judge whether the energy shock will lead to second-round inflation effects, namely businesses passing on higher costs and workers seeking higher wages.

Mann said that despite low vacancy levels, she is still concerned that the wage channel could keep inflation persistently above the Bank’s 2% target.

She said, "They will be starting negotiations at a time when inflation is above 4% and very likely just after experiencing a bad Ofgem energy price rise." She was referring to the quarterly hike in the cap on UK household gas and electricity bills.

She also pointed out the possibility that the UK minimum wage may be significantly raised again, that businesses could pass that cost on to consumers via price increases, and that another 40% of the workforce "negotiates somewhat like unions do." She noted the main concern among workers is the cost of living.

She said that there is an "upside risk" to UK inflation, and delaying rate hikes would make the task of getting inflation back to target doubly difficult. If inflation ultimately proves milder than feared, policymakers can "pivot at any point."

She warned that inflation is already "deeply rooted."

Mann stated that, despite the energy shock, the real economy has remained resilient, with the main risk being that if households expect prices to keep rising sharply, they may boost their savings buffers to protect their purchasing power.

Although Mann remains worried about near-term inflation, she pointed out that businesses are adapting to the energy shock, making the economy less exposed to further price spikes.

"They are actively investing in shifts in energy production, such as moving from gas to wind and solar," she said. "Ultimately, you will be less exposed to the volatility of energy shocks in the future, and this is how the real economy changes its behavior in response to energy fluctuations."

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