The Bank of England cannot rule out more interest rate increases, a member of its decision-making body said on Thursday.
Jonathan Haskel told an audience in Washington DC that inflation could be worse, but that the Bank might be forced to increase interest rates again in order to bring it back to its 2% target.
“As difficult as our current circumstances are, embedded inflation would be worse,” Mr Haskel said a day after Consumer Prices Index inflation was revealed to have hit 8.7% in April.
But, he added: “The fact of the matter is that inflation in Britain is too high … these numbers are just too large.”
April’s inflation figures were a drop from the month before, but still far ahead of what analysts had expected. Following the announcement, markets started to expect interest rates to go higher than they previously had thought.
The Bank’s Monetary Policy Committee (MPC), on which Mr Haskel sits, has raised rates 12 times in a row to 4.5% from 0.1% in December 2021.
“The MPC remains committed to bringing inflation sustainably back to the 2% target, and that is what we will do. But to do this, further increases in Bank rate cannot be ruled out,” he said in a speech at the Peterson Institute for International Economics.
He suggested that there have been no comparable periods in recent history to understand the path for inflation.
The last time inflation levels were this high was in the 1970s and 1980s, but “a lot has changed in the structure of the economy since then”, he said.
Mr Haskel added: “The period since the Bank of England’s independence in 1997 has not seen a series of shocks like this before.”
He added that there was not much evidence to show that inflation was being largely impacted by firms raising prices.
“My reading of official UK inflation data is that the contribution of rising business profits to recent inflation is small,” Mr Haskel said.