MNI BRIEF: Persistent Inflation Scenario A Reality -BOE's Mann

The Bank of England's upside scenario of more persistent inflation is "playing out," external Monetary Policy Committee member Catherine Mann said in pre-released text of her speech at the Banco de Mexico.

She said that the downside scenario of weaker domestic outlook feeding through to lower inflation remained a risk but that the upside scenario ,with second-round inflation effects in domestic price- and wage-setting, was being realised. She cited recent BOE research in support, including work that showed food prices, which are high at present, are a key driver of inflation expectations. (See MNI INTERVIEW: Recent Inflation Shocks Restrict Policy - Monti)

Mann said that as a policy activist she saw a more prolonged period of a flat Bank Rate as appropriate but added "I stand ready for a forceful policy action, in the form of larger, more rapid Bank Rate cuts, should the downside risks to domestic demand start materialising."