Rates of interest might want to rise once more to forestall inflation changing into a persistent drawback within the UK, a Financial institution of England policymaker has warned.

A scarcity of staff and excessive wage calls for had been prone to proceed pushing up inflation, appearing as a counterweight to falling power costs, mentioned Catherine Mann, a member of the Financial institution’s financial coverage committee (MPC), which units the bottom charge.

She mentioned extra tightening was wanted and cautioned {that a} pivot on financial coverage in direction of rate of interest cuts was not imminent, signalling that they had been prone to rise once more when the MPC meets subsequent month.

The MPC has elevated its base rate of interest 10 occasions since December 2021 to 4% to dampen client spending and restrict the rise within the client costs index, which hit 10.1% in January.

In a speech on the Decision Basis’s headquarters in London, Mann argued that prime rates of interest had been wanted to forestall inflation changing into embedded in wages and costs. She warned this might result in “prolonged persistence of inflation into this yr and the subsequent”.

A former funding financial institution economist who joined the nine-member MPC in 2021, Mann has constantly argued for a sharper enhance in rates of interest than her colleagues to quell inflation. She was a lone voice calling for a 75 foundation level enhance, when the MPC lifted charges by half a per cent, from 3% to three.5% in December.

Metropolis analysts have forecast that inflation will fall to about 2% by the top of the yr, nicely beneath the 4% prediction by the central financial institution.

They argue that regardless of a good labour market, falling power costs would carry down inflation, resulting in decrease wage calls for.

The MPC members Silvana Tenreyro and Swati Dhingra voted in December to take care of rates of interest at 3%, arguing that the consequences of excessive borrowing charges would feed by way of into the broader financial system this yr.

Greater than 1.5 million mortgage payers are anticipated to refinance their loans at a lot greater rates of interest this yr, consuming into their disposable incomes.

Mann mentioned: “We now have an inflation remit, and we’ll obtain it a technique or one other … Failing to do sufficient now dangers the worst of each worlds – greater inflation and decrease exercise – as financial coverage should keep tighter for longer to make sure inflation returns sustainably again to the two% goal.”

Cash markets are forecasting that when the MPC meets subsequent month it’s going to resolve on a quarter-point charge rise, to 4.25%.