Bank of England Monetary Policy Committee (MPC) member Catherine Mann said in an interview with the Financial Times that the BoE's policymakers shouldn’t be seduced by headline inflation, which has come down, because of the role of energy and external aspects working through both.
She also noted that she sees an upward ratchet to both the wage-setting process and price process. "And that is the upside risk that I think is in, and 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," she added.
According to Mann, it takes multiple years for wages to catch up to all the desired real wages that workers want to have. "And when it takes a long time, that means going forward, it’s going to take a long time for wage deceleration to move us into a position where services will decelerate, services prices will decelerate down to 3 per cent," the official argued.