LONDON (Reuters) – Britain’s very high inflation risks distracting businesses from the longer-term decisions needed to boost ailing productivity, Bank of England policymaker Catherine Mann said in a podcast released on Thursday.
Mann repeatedly called for half-point increases in the BoE’s main interest rate before a majority of the Monetary Policy Committee backed one last month, when official data showed consumer price inflation had hit a 40-year high of 10.1%.
Speaking with academics about Britain’s productivity – which lags the United States, Germany and France in output per hour worked – Mann said the current surge in inflation would force businesses to focus on short-term pricing decisions instead.
“Very high inflation, which of course we are experiencing right now, has many downside consequences,” she said.
“In a high-inflation environment, firms are scrambling to figure out what their best pricing strategy is. Productivity, on the other hand, comes when firms are focusing their attention on their products, their people, their investment choices and their global and domestic market opportunities,” she added.
The BoE will release its next interest rate decision on Sept. 15, when financial markets expect the central bank to raise interest rates to 2.25% from 1.75%.
Mann was speaking on a podcast produced as part of a series by The Productivity Institute, an academic forum funded by Britain’s Economic and Social Research Council.
(Reporting by David Milliken; editing by William James)