BoE's Mann: If price and wage expectations realised, inflation could stay strong well into 2023

Bank of England policymaker Catherine Mann said on Friday that expectations for prices and wages, if realised, are ingredients for headline inflationary pressures that could stay strong for longer, perhaps well into 2023. Residual strength in both wages and prices are likely to continue well into 2022, she added. 

Additional Remarks:

"There are headwinds facing these price and wage expectations."

"Inflation data since November have not been consistent with the stabilizing inflation rate which was the forecast at that time."

"If the effects of the demand-supply imbalances apparent in 2021 continue, we could see another jump in wages and prices in 2022 yielding outturns where CPI inflation stays strong for longer."

"Policy actions by other central banks have cross-border ramifications which will be important for the MPC."

"The next steps could exhibit a shallower path."

"To the extent that monetary policy actions now dampen expectations, and to the extent that any deceleration of global prices is passed-through to UK inflation, steps could exhibit a shallower path."

"We will make an assessment with regard to February policy only after reviewing the research from staff."

"To the extent that financial markets are already cautioning decisions, the next steps could exhibit a shallower path."

"Changing expectations is the first defense against a reinforcing wage-price dynamic."

"We aim to bring inflation back down to target such that workers can enjoy real wage gains from their labor."

"What monetary policy needs to do now is to temper 2022 expectations for wage and price increases to prevent them from being embedded in the decision-making of firms and consumers."

"To the extent that global inflation underpins UK domestic inflation, monetary policy’s reaction would have to be more severe than appropriate for domestic conditions alone."

"Going into 2022, current price and wage expectations coming from the DMP survey are inconsistent with the 2% target, and if they are realized in 2022 are likely to keep inflation strong for longer."

"Ingredients appear to be in place for inflation to stay strong for longer, but costs becoming embedded in prices to create a reinforcing dynamic is not inevitable."