The Bank of England should push ahead with deeper base rate cuts, said Monetary Policy Committee member Swati Dhingra.
High interest rates had hurt consumption and business investment, and damaged the supply capacity of Britain’s economy, added the central bank’s external committee member who is regarded as a long-term dove among the rate-setting group.
“That’s why I think we should be easing policy more,” Dhingra told Bloomberg Television in an interview.
She estimated that the neutral base rate — the rate at which monetary policy is neither restrictive nor expansionary, was between 2.5% and 3.5%.
Earlier this week Bank of England governor Andrew Bailey said he expects four interest rate cuts next year if the economy continues to benefit from easing inflation.
He added: “[Inflation] has come down faster than we thought it would. I mean, a year ago we were saying that inflation today would be around 1% higher than it actually is.”
The cost of borrowing is currently 4.75%, after two 0.25% rate cuts this year. Its initial August reduction was the first in four years.
Inflation stands at 2.3%, above the central bank’s 2% target.
The Monetary Policy Committee has long said it wants to see services inflation and pay rises fall below 5%.
The latest readings hover around that level. Services annual inflation rose from 4.9% to 5% in October, while regular earnings lifted by 4.8% from July to September from a year ago.
Dhingra is thought to be among the rate-setters who would favour a base rate cut at the committee’s final meeting of the year on 19 December.
However, money markets are currently betting on a 94% probability of no change this month.