BoE Mann: The 'Luck' of the Era of Low Inflation Has Come to an End
Alina Collins
BOE hawk Catherine Mann warns the era of low inflation — the Great Moderation — is finished, and central banks now face a world far more vulnerable to external shocks. This means rates won't come down easily.
What does "good luck running out" actually mean?
Mann's "good luck" refers to the Great Moderation — roughly the 1990s through 2020, when global inflation stayed persistently low. She argues that era's success owed more to fortune than to central-bank skill.
This means → the old playbook — inflation targeting plus central-bank independence — is no longer a reliable shield.
In plain terms = the sea was calm for decades; the steady ship wasn't proof of a great captain. Now the storms are here, and the real test begins.
Why are external shocks coming more often?
Russia's 2022 invasion of Ukraine pushed UK inflation into double digits; the current Iran conflict is driving prices higher again.
This reflects a shift: geopolitical conflict is becoming a standing driver of inflation, not a one-off event.
In plain terms = it used to be an occasional fire; now fires break out every few months — and the central bank's extinguisher is running low.
What will the BOE do next?
The BOE has shelved plans for further rate cuts this year and is now considering a hike to contain inflation.
Markets expect the base rate to rise from 3.75% by 25 basis points before the end of 2026.
This means → for ordinary borrowers, mortgage and loan costs won't get cheaper any time soon — they may get more expensive.
Where do the hawks and doves disagree?
Mann is one of the most hawkish members on the BOE's Monetary Policy Committee. Her priority is clear: crush inflation first.
Governor Andrew Bailey struck a softer tone the day before, saying the BOE can tolerate inflation above target for a time to support a weak economy.
But Bailey drew a line too — "If signs of second-round effects emerge, that tolerance will diminish."
Put simply = the hawk says "put the fire out now"; the dove says "let it burn a while, but don't let it spread next door."
Has the role of financial markets changed?
Mann singled out financial markets as a "more important disciplining force" constraining central-bank decisions.
This means → when the BOE sets policy, it watches not just economic data but also whether markets will vote with their feet.
This reflects a real-world compression of central-bank independence by market forces.
Content is for reference only, not financial advice.