© Reuters. Swati Dhingra, a member of the Bank of England’s Monetary Policy Committee, speaks during an event in London, Britain, March 8, 2023. REUTERS/Hannah McKay
LONDON (Reuters) – Bank of England rate setter Swati Dhingra said on Wednesday it would be prudent to leave interest rates unchanged as previous increases in borrowing costs have yet to be reflected in an economy already weak.
Despite recent signs that the UK economy may be holding up better than some economists feared, Dhingra stood by his view that the BoE risks hurting the economy unnecessarily by raising rates too high.
“In my view, a prudent strategy would keep policy stable amid increasing signs that external price pressures are easing, and be prepared to respond to price developments,” Dhingra said in a text of a speech before the Resolution Foundation think tank.
“This would prevent excessive tightening and sustainably return the economy to our 2% inflation target over the medium term.”
Along with Silvana Tenreyro, Dhingra voted last month to keep interest rates at 3.5%, while the other seven members of the Monetary Policy Committee voted for an increase to 4%.
Financial markets are now fully pricing in an additional 0.25 percentage point hike on March 23 after Federal Reserve chief Jerome Powell signaled that more interest rate hikes were likely in the United States. Joined.
Dhingra stressed on Wednesday that the risk of interest rates being too high was a bigger threat than the risk of embedded inflationary pressure.
“My conclusion is that given little evidence of higher cost-driven inflation, further tightening is a greater risk to output and the medium-term inflation target,” he said.
His views contrasted with those of Catherine Mann, another outside member of the MPC, who on Tuesday doubled down on her view that higher interest rates are likely needed to lessen the risk of double-digit inflation taking root in the economy.