The Bank of England should be wary of lowering interest rates too quickly because wage growth and price pressures could stay elevated, one of its rate-setters said on Monday.

Appearing on the Financial Times’s The Economics Show podcast, Catherine Mann, an external member of the Bank’s monetary policy committee (MPC), said there may have been a structural shift in the UK economy towards higher inflation, which would require tighter policy to treat.

“There is an upwards ratchet to both the wage-setting process and the price process”, Mann, a former chief economist at the Organisation for Economic Co-operation and Development, said, adding that “it may well be structural, having been created during this period of very high inflation over the last couple of years”. She warned that it could take a long time for this dynamic to unwind.

UK inflation has eased from a four-decade high of 11.1 per cent to 2 per cent, in line with the Bank of England’s target, thanks to an easing in energy and food prices.

Despite that reduction, there is concern within the MPC about high pay growth and strong services inflation, both of which remain elevated at 5.7 per cent.

Figures on Wednesday are expected to show that the headline rate of price growth in the UK inched up to 2.3 per cent in July but that services inflation cooled. Wages are tipped to have accelerated by 5.4 per cent in the three months to June.

Mann’s comments reinforce her long-held preference to keep monetary policy restrictive to prevent inflation from staying above the Bank of England’s 2 per cent target over the long run.

She has consistently voted to either raise rates or leave them unchanged since joining the MPC in 2021, cementing herself as the most hawkish member of the nine-strong group, which sets the level of interest in the UK economy every six weeks or so.

However, she did concede that her view had been watered down by steady progress on curtailing inflation. Ranking her level of hawkishness now out of ten, she said: “I would say I’m a seven. But in the past, I have been a ten.”

Mann, alongside Huw Pill, the chief economist at the Bank of England, and her fellow external MPC members Jonathan Haskel and Megan Greene, voted to leave the base rate unchanged at 5.25 per cent at the committee’s meeting this month.

The group narrowly lost out 5-4 in the vote, with Andrew Bailey, the governor of the Bank of England, among those voting to cut borrowing costs by a quarter point to 5 per cent, the first reduction in more than four years.

Mann said: “Inflation has come down but if we look underneath the headline, we should not be, in the UK — and I think that’s true in the US as well — seduced by headline inflation.”

She pointed to a reduction in the volume of available workers for businesses to hire raising the risk of keeping inflation high and economic growth constrained.