By Andy Bruce
LONDON (Reuters) -BoE policymaker Catherine Mann said on Tuesday that the newly detected Omicron coronavirus variant could hurt consumer confidence, which would weaken the economy's recovery from its historic pandemic hit.
But Mann said there were ways that Omicron - which health officials fear will be harder to tackle with existing vaccines - could push up inflation.
"It's a particular question mark here as to whether or not that (Omicron) is going to reduce consumer confidence and leave us again in a situation of somewhat of a slacker demand for spending than we might have thought going forward," Mann said in a question-and-answer event hosted by Barclays (LON:BARC).
At the same time, the impact of Omicron on consumers could slow a shift in spending towards services which had been expected to slow inflation, she said.
Furthermore, the new variant could add to strains on supply chains in China, where tough lockdowns have been imposed in areas affected by outbreaks of the coronavirus.
"Under a zero COVID strategy, there are these potentials for additional disruptions to the supply chain," Mann said.
Supply chain problems caused by the pandemic since its onset almost two years ago have been key in the rise in inflation that has put the BoE and other central banks on alert.
Mann and six other members of the BoE's nine-strong Monetary Policy Committee voted earlier this month to keep the BoE's main interest rate on hold at 0.1%, but she was in a minority calling for an early end to the BoE's 875-billion-pound ($1.17 trillion) government bond purchase programme.
Inflation expectations remained well-anchored in Britain, she added.
Bets in financial markets on a BoE rate hike on Dec. 16, after the central bank December monetary policy meeting, have been scaled back in recent days because of the emergence of the Omicron variant. Markets now see a slightly greater than 50% chance of a Bank Rate rise to 0.25% from 0.1%.
Mann said during Tuesday's Q&A event it was premature to talk about the timing of any rate increases by the central bank.
"It's premature to ... even talk about timing much less how much," she said when asked how large the BoE's first increase in Bank Rate should be.
On Friday, shortly after news of the Omicron variant broke, the BoE's chief economist, Huw Pill, said the way was clear for a rate hike although he gave no steer about whether he would back a move as soon as the December meeting, and he said there were still risks to public health.
Mann said the BoE was confident that medium-term inflation expectations remained anchored.
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