Bank of England policymaker Catherine Mann said that financial markets are overestimating the extent of the Bank of England's monetary easing this year. She also added that it is unlikely that the Bank of England will start cutting interest rates earlier than the Fed.
Markets currently expect the Central Bank of England to cut borrowing costs three times this year, with the start of a monetary easing cycle forecast in August. As for the Fed, markets see a 69.7% probability of a rate cut in June, with about 80 basis points of cuts priced in for this year, according to the CME FedWatch Tool.
"Given the current pricing, I believe that in some sense we do not need to ease monetary policy, because the market has already taken such a step into account,” - Mann said, adding that wage dynamics in the UK are stronger and more stable than in the US or the eurozone, and therefore the central bank should not rush to cut interest rates.
“There has been substantial easing, even since the vote last week, - she said about market rates. - I'm thinking that perhaps markets are a bit too complacent about how long they think the Bank of England will hold rates.”