The Bank of England's interest rate setting presented a divergence of views among policymakers and market players on how quickly inflation might fall with Governor Andrew Bailey stressing the uncertainty, a week after the BoE suggested its rate hikes may be nearing a peak.
Members of the Monetary Policy Committee noted differing views on the risks posed by inflation, which hit a 41-year high of 11.1% in October before falling to 10.5% in December, still more than five times the BoE's 2% target.
Jonathan Haskel, an outside MPC member, told lawmakers' Treasury Committee in parliament that he remained prepared to "act decisively" on persistent inflation. At the end of the MPC debate, Silvana Tenreyro said interest rates are already too high.
Like other central banks, the BoE is trying to reduce risks from a surge in inflation and it raised interest rates for the 10th time in a row last week, taking Bank Rate to its highest level since 2008 at 4%.
However, it is also worried about worsening what is expected to be the worst recession among the rich major economies this year. Last week, Bailey signaled that the tide was turning in the BoE's strategy against high inflation, although it was too early to declare victory.
On Thursday he reiterated the risks to the central bank's main forecast. Haskel aligns himself with Catherine Mann who also sees substantial upside risks to the BoE's price forecast.
"Economic theory suggests that the uncertainty surrounding continued inflation should be balanced by more decisive action," Haskel said in his annual report to parliament.
Conversely, Tenreyro, which last week voted to keep Bank Rate at 3.5%, pointed out that the full force of the BoE's rate hikes over the past year had yet to be felt, with momentum in the economy already fading.
BoE Chief Economist Huw Pill told lawmakers there were some signs of weakness in the labor market that could help curb inflationary pressures.
