The Bank of England policymaker Catherine Mann has said she backed a half-point cut in UK interest rates last week because she believes the downturn in the jobs market will make the inflation “hump” this year short-lived.

Mann surprised financial markets last week by switching from voting against the Bank’s last cut, in November, to supporting a half-point reduction.

She was one of two dissenters to the nine-member monetary policy committee (MPC) decision to reduce the Bank rate by a quarter-point to 4.5%, with both supporting a bigger reduction.

The Bank is expecting inflation, which was 2.5% in December, to rise to 3.7% later in 2025, driven predominantly by energy prices, as well as rising water bills and bus fares. But Mann said her attitude was “don’t be dismayed by the hump, yet”.

She argued that, with the jobs market slowing sharply, workers will be unlikely to be able to bid up their wages to offset the impact of higher prices.

At the same time, weak consumer demand will mean retailers are unable to pass on the higher costs of inputs such as energy, in prices.

“Wage settlements and the pricing power of firms will determine how much inflation outcomes will be driven by expectations as well as the one-off factors,” Mann said. “I judge that both will face strong headwinds.”

She pointed to survey evidence showing that some companies plan to reduce headcount, as a result of “overall economic conditions, recent increases in the national living wage, and salient aspects of the autumn budget such as the increase in employer national insurance contributions”.

Mann also suggested there is evidence that some companies are financially vulnerable as recent data from the Office for National Statistics showed that companies were holding cash to sustain them for just four months.

“Research suggests that such cashflow vulnerability is associated with job shedding, which may become more apparent as Covid support policies run off,” she said.

Explaining why she backed a half-point, rather than a quarter-point cut, Mann said she wanted to send a strong signal about the Bank’s intentions – and suggested last year’s two quarter-point reductions had not fully fed through financial markets to borrowers.

“It is not just the immediate policy decision that needs to be communicated. Providing insights on the future path matters for the activist policymaker,” Mann said.

However, Mann did not point to the need for fresh rate cuts in the immediate future, despite voting for a half point cut last week.

Pointing to what she called “structural impediments” to achieving the Bank’s 2% inflation target, she said “the activist policymaker needs to maintain this stance of tightness, restrictiveness, even after this decision.”