Bank of England (BoE) interest rate-setter Catherine Mann has warned that more interest-rate rises are necessary to bring down inflation as the BoE has been "insufficiently" aggressive in dealing with it.
"I believe that more tightening is needed, and caution that a pivot is not imminent," Mann said in a speech delivered to the Resolution Foundation think-tank in London. "In my view, a preponderance of turning points is not yet in the data."
The BoE raised interest rates to 4% earlier this month but signalled it was close to ending a run of increases which began in December 2021.
Mann — one of the more hawkish members of the Bank’s Monetary Policy Committee (MPC) — said that without further rate hikes high inflation could persist into 2024.
This sticky inflation, she said, could lead to more UK businesses taking a backwards-looking approach, and therefore make it even harder to bring prices down.
“Given that the risk of increasingly persistent inflation rises disproportionately with the share of backward-lookingness, I believe that more tightening is needed, and caution that a pivot is not imminent,” she said.
Markets are pricing in an expected 25 basis points rate hike — which would represent a slowdown in the pace of tightening by the BoE — at the March meeting, taking the Bank Rate to 4.25%, its highest since October 2008.
Mann is one of the seven MPC policymakers who voted to raise UK interest rates to 4% this month, from 3.5%. In December, she was alone in calling for a 75 basis point increase, when the MPC also lifted rates by half a percentage point, from 3% to 3.5%.
Two other members of the MPC — Swati Dhingra and Silvana Tenreyro — voted to pause the rate hikes at this month's meeting.
"We have an inflation remit, and we will achieve it one way or another. Failing to do enough now risks the worst of both worlds," Mann said.
Inflation was 10.1% in January, more than five times the Bank’s target of 2% per year.