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Rate fears: Swati Dhingra (pictured) was the only member of the Bank of England’s rate-setting monetary policy committee to vote for a rate cut this month.
A senior Bank of England official has warned that leaving interest rates at their current level risks “scarring” the British economy.
Swati Dhingra, the only member of the Monetary Policy Committee (MPC) to vote for a rate cut this month, said keeping them at a 16-year high of 5.25 per cent poses a threat to living standards. .
He warned it could lead to a “hard landing” – or a painful slowdown – and “scarring” with permanent damage to the economy.
Failure to cut rates posed “downward risks to living standards.”
His comments came just days after Andy Haldane, the Bank’s former chief economist, said high interest rates risked “crushing” the economy.
“It’s one thing to have missed inflation on the way up, which happened, and quite another to have crushed the economy on the way down,” he said.
“That double blow to credibility is one that, if I were a central banker, in my old job, I would seek to avoid.”
The Bank raised rates from a record low of 0.1 percent in 2021 to 5.25 percent, but did not stop inflation from reaching a 40-year high of above 11 percent.
Inflation is now 4 percent – double the 2 percent target – but with the economy in recession, the Bank is again criticized for not reacting.
The MPC kept rates at 5.25 per cent this month, in a three-way vote with Dhingra backing a cut, two members calling for an increase and six winning with a no-change vote.
This week, Bank of England Governor Andrew Bailey played down fears about the economy, telling MPs that the UK’s “minimal” recession may now be over.