Higher interest rates will “increase the pain” of stressed households, warns Bank of England expert.

Another increase in interest rates in the UK could damage an already weakened economy, a Bank of England expert warned.

Any increase “risks unnecessarily impacting output at a time when the economy is weak and exacerbating problems for budgets when budgets are already overstretched,” said Swati Dhingra, a member of the bank’s Monetary Policy Committee (MPC).

The bank should keep interest rates stable when the committee meets again later this month, he said at a conference at the Resolution Foundation think tank amid “growing signs that external price pressures are easing.”

The economist believes that concerns about domestic inflationary pressures, known as “baked inflation”, are exaggerated. Much of the inflation is due to higher energy and import prices, she said.

“Overall, domestic inflation is likely to be lower than we estimate. Consumption remains weak and many of the tightening effects of monetary policy have yet to be fully felt,” she said in a rare speech since becoming an MPC member.

Dr. Dhingra, who is seen as a condescending member of the MPC, joined the bank’s interest committee in August last year.

Her view of inflation differs sharply from that of her MPC colleague, Dr. F. Katherine Mann, who has repeatedly warned of the dangers of inflationary complacency. “When there is uncertainty about the level of persistence of inflation, it is better to assume a high level because the cost of error is higher when the true inflation process is more stable than when the true inflation process is less constant,” said Dr. Mann. .

By the end of the year, inflation in the UK is forecast to fall to around 5 per cent from the current 10.1 per cent. City traders expect the bank to raise interest rates by 0.25 percentage points to 4.25 percent on March 23.

Her comments come after Andy Haldane, a former MPC member, said the bank should be cautious about future rate hikes.

“Given the tightening that has already taken place last year and modest gains from a low base, I would proceed cautiously before embarking on another round of sharp tightening,” Haldane told Bloomberg. .

In 2021, Mr Haldane, alarmed by signs that UK inflation was picking up amid the pandemic, argued that the Bank of England should have raised rates faster.

He also warned that the bank is now facing “the most difficult yards” in bringing inflation back to its 2 percent target. He argued that the bank should maintain its goal and suggested that it would take longer to reach that goal, three to four years instead of the current one to two years.

“The bank can make an open and transparent decision that it will take one to two years longer than usual, depending on the agreement with the Treasury Department,” Haldane said.

“They could point it out in advance and say that it will take us three years, three and a half years or four years, a little more than usual, for us to play a cushioning role. Or they can leave it a little more open.