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During Tuesday’s European trading session, the British pound (GBP) weakened against major currencies following dovish comments from Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann in an interview with the Financial Times (FT).
Investors were eagerly awaiting an interview with Catherine Mann to find out what prompted her to back a bigger rate cut in last week’s policy decision, after having long been a hawk.
Mann said her view on policy had changed because “demand conditions are much weaker than they have been.” Her call for a 50 basis point (bps) rate cut was therefore intended to communicate to traders “what we believe are the appropriate financial conditions for the UK economy”.
Asked about the outlook for inflation and demand, Mann expressed confidence that inflation would remain consistent with the BoE’s 2% target later this year and saw a “non-linear” fall in employment.
Last week, the Bank of England cut its key lending rate by 25 basis points to 4.5% as expected, with a 9-0 vote in favor of a rate cut. Seven MPC members voted for a 25 basis point rate cut. Surprisingly, Catherine Mann joined MPC member Swati Dhingra in supporting a larger-than-usual rate cut.
In Tuesday’s session, investors will be watching for more interest rate guidance from Bank of England Governor Andrew Bailey in a speech at the University of Chicago Booth School of Business in London.
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