Financial markets pricing in too many rate cuts, warns Bank policymaker

Catherine Mann, who sits on the central bank’s rate-setting committee, also dismissed suggestions the UK would cut rates before the US and Eurozone.

A Bank of England ratesetter has said the financial markets are expecting too many interest rate cuts (Aaron Chown/PA) (PA Wire)

The financial markets are pricing in “too many cuts” to interest rates this year, a policy maker at the Bank of England has warned.

Catherine Mann, who sits on the central bank’s rate-setting committee, also dismissed suggestions the UK could cut interest rates back ahead of the US and the Eurozone.

It comes a week after Ms Mann was among members of the Monetary Policy Committee to vote in favour of holding UK interest rates at 5.25% for the fifth consecutive time.

Bank governor Andrew Bailey said the economy is “not yet at the point” where rates can be lowered, but things are “moving in the right direction”.

Markets are currently pricing in a reduction of interest rates to around 4.5% by the end of the year.

Nevertheless, Ms Mann suggested on Bloomberg TV on Tuesday that traders should not get too excited about a raft of imminent cuts to interest rates.

“They’re pricing in too many cuts,” she said. “That would be my personal view, and so in some sense, I don’t have to cut because the market already is.”

She also highlighted some differences in UK inflation compared with other countries.

Ms Mann added: “Wage dynamics in the UK are stronger and more persistent than the wage dynamics in either the United States or the euro area.

“Underlying services dynamics are also stickier, more persistent than either the US or the euro area.

“So on that basis, it’s hard to argue that the BOE would be ahead of the other two regions, particularly the United States.”

She also stressed that UK mortgage lenders have already reduced some borrowing costs, putting slightly less pressure on the Bank to act quickly with rate cuts.

The pound edged higher against the dollar, rising by 0.19% to 1.266, following her comments.