A Bank of England policymaker has called for UK interest rates to stay on hold for longer in order to keep rising inflation at bay.
Catherine Mann, a member of the Bank’s Monetary Policy Committee (MPC), said keeping rates at the current level was “appropriate right now”.
“A more persistent hold on bank rate is appropriate right now, to maintain the tight (but not tighter) monetary policy stance needed to lean against inflation persistence persisting,” she wrote in a speech due to be delivered in Mexico on Tuesday.
“However, I stand ready for a forceful policy action, in the form of larger, more rapid bank rate cuts, should the downside risks to domestic demand start materialising.”
Interest rates were cut to 4% earlier this month.
But for the first time in the MPC’s history, rate-setters had to vote twice after failing to reach a majority the first time.
Governor Andrew Bailey said it had been a “finely balanced decision” and stressed that “any future rate cuts will need to be made gradually and carefully”.
Ms Mann was among the members of the nine-person committee who preferred to keep rates on hold at 4.25% at the last meeting.
She is set to say in her speech, held at the Future of Central Banking conference, that the risk of increased inflation persistence is currently “playing out”.
“The projected inflation hump is higher than in our forecast in May,” she said, adding that food prices were “elevated”.
UK Consumer Prices Index (CPI) inflation has been rising in recent months, with food price inflation climbing to the highest level in more than a year.
The Bank of England is now expecting CPI to peak at 4% in September, having previously estimated that it would peak at 3.5%.
Ms Mann added that “by squeezing out inflation today, you prevent it from persisting in the future”, adding that “if this policy is not followed, even tighter policy would be required later” to rein in inflation.
