Further interest rate rises risk “deepening the pain” for households and scarring the economy, a Bank of England policy maker has warned. Dr Swati Dhingra claims the full effect of the Bank’s 10 consecutive interest hikes to combat inflation has not yet fed through to the economy.
In a speech to the Resolution Foundation think tank, Dr Dhingra called for rates to be held at four per cent as there is “little evidence of further cost-push inflation”.
She also warned that any more rate rises in future could permanently damage the economy.
Dr Dhingra, a member of the Bank’s Monetary Policy Committee (MPC), told the think tank: “Overtightening poses a more material risk at this point, through potential negative impacts from increased borrowing costs and reduced supply capacity going forward.
“It risks unnecessarily denting output at a time when the economy is weak and deepening the pain for households when budgets are already squeezed through energy and housing costs.”
Last month, Dr Dhingra was one of two policy makers who opposed raising the Bank’s base rate by a half-point to four per cent. However, the MPC voted 7-2 for the rise.
The next rates decision will be released on March 23 and markets believe the MPC will vote for a quarter-point rise.
It comes after US Federal Reserve chief Jerome Powell signalled further rate increases could be on the cards and MPC member Catherine Mann said another rise was more likely than a hold or cut.
But Dr Dhingra said: “In my view, a prudent strategy would hold policy steady amidst growing signs that external price pressures are easing and be prepared to respond to developments in price evolution.
“This would avoid overtightening and return the economy sustainably to our two per cent inflation target in the medium term.”
Ms Mann has previously said that keeping interest rates high would cut the likelihood of double-digit
inflation becoming the norm.
She told how surging food prices and the tight labour market meant there was a risk inflation could keep rising and pausing rate increases would “send the wrong message”.
Last week, Bank of England governor Andrew Bailey said it would look at new data before making any firm decisions.
For all the latest Business News Click Here
Denial of responsibility! FAECO is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – at email@example.com The content will be deleted within 24 hours.