BoE's Mann warns UK wage pressure may take years to ease

Catherine Mann, a member of the Bank of England's Monetary Policy Committee, has warned that wage pressures in the UK economy could take years to ease.

Mann opposed this month's interest rate cut, stating in the Financial Times podcast that she now considers her hawkish stance to be a 7 out of 10, down from 10 out of 10 earlier this year when she voted to raise rates further from their 16-year high of 5.25%.

"There is an upwards ratchet to both the wage setting process and the price process and  ...  it may well be structural, having been created during this period of very high inflation over the last couple of years," she said.

British inflation returned to its 2% target in May, but data this week is expected to show an increase to 2.3%. The BoE has forecast it will rise further to around 2.75% later this year as the impact of last year's energy price decline diminishes.

Mann noted that wages had risen most rapidly for the lowest-paid workers, which has compressed pay scales. She suggested this could create upward pressure on wages in the coming years, as higher-paid workers may demand to restore the earnings premium they once had.

Britain's new Labour Party government has pledged to maintain the previous Conservative government's achievement of setting the minimum wage at two-thirds of median earnings, one of the highest levels globally.

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