Bank of England officials say: Gradual rate cuts are "no longer effective"! Now we need to take strong measures to support the economy

According to the Zhitong Finance APP, Bank of England policymaker Catherine Mann stated that gradual interest rate adjustments can no longer convey clear signals to the turbulent financial markets, and larger adjustments are now needed to "penetrate" market noise to promote economic development. In a speech prepared for the Reserve Bank of New Zealand on Friday morning, Mann explained why she voted last month to support a significant rate cut of 50 basis points while insisting that policy needs to remain restrictive to address ongoing inflation. In early February, Mann's vote to lower borrowing costs by 25 basis points to 4.5% during the Monetary Policy Committee's third meeting surprised the market, marking her shift from the hawkish camp to the dovish camp. This move triggered a strong market reaction, but in the following days, market trends largely reversed. Mann stated that her aggressive action was due to the signals from policymakers and economic data being overwhelmed by the "cross-border spillover effects" from financial markets, particularly those from the United States. Evidence she cited includes significant fluctuations in borrowing costs while the Bank of England maintained interest rates, as well as the rise in short-term rates following the Bank of England's easing of policy. She said, "Monetary policy must navigate through turbulent financial markets, an economy battered by shocks, and elusive expectations. A larger rate cut, such as the one I voted for at the recent meeting, can penetrate this turbulence, aiming to communicate policy positions more effectively and influence the economy." However, Mann insisted that her vote last month in favor of a 50 basis point rate cut does not mean she believes the inflation threat has ended. She expects inflation to rebound from 3% to 3.7% in the coming months, stating, "The latest data on wage and price developments and the expected trajectory from a year ago have not aligned with the target." "I have emphasized the necessity of maintaining restrictive bank rates for a longer period to curb this upward tendency—I still believe this," she said, adding, "The necessity of maintaining restrictions is particularly important." If Mann's wish to cut rates by 50 basis points to 4.25% is realized, interest rates will still remain restrictive. "Keeping monetary policy restrictive for a longer time allows me to assess the persistence of inflation developments." She explained that taking bold decisions to steer the market in the right direction and maintaining high rates before the inflation threat clearly dissipates is "an active monetary policy strategy." Gradualism is effective "when capital flows are small and markets are more stable," as it aids in the transmission of monetary policy. Today, volatility comes from financial markets, thus new approaches are needed. "The premise of gradualist monetary policy is no longer valid," Mann pointed out. During the Q&A session following her speech, Mann was asked whether activism is the right approach given the current uncertain outlook—"taking small steps in a dark room," Mann responded, "Part of the reason the room is dark, or the fog has not cleared, is that monetary policy has not taken a decisive stance." Defending her decision to push for a bold rate cut last month, she stated, "I don't mind changing my vote when the economic environment changes. If I make a wrong judgment, I will acknowledge it. I don't mind admitting it."