Bank of England policymaker Swati Dhingra said on Wednesday there would be real economic costs to delaying interest rate cuts until there was further evidence that underlying inflation pressures were easing.
"Waiting for lagging indicators of domestic relative price growth to fall sharply before reducing rates comes with a cost of foregone improvements in living standards and a risk of lowering supply capacity for the future," she said at an event hosted by MNI Connect.
Dhingra voted this month to cut interest rates from their 16-year high of 5.25%, the first member of the BoE's Monetary Policy Committee to do so since early in the COVID-19 pandemic.
Most of the MPC voted to keep rates on hold - and two voted for a further increase - because they were unsure that wage growth and services prices would slow enough for inflation to be return sustainably to its 2% target.
While the BoE forecast this month that lower energy prices would push inflation down to 2% in the second quarter of this year, most of the MPC expect it to rise back towards 3% at the end of the year as the effect of the fall in energy prices fades.
Dhingra said she did not think current wage growth rates of more than 6% were necessarily that far from levels consistent with 2% inflation, as wage growth had been 4-5% before the global financial crisis.
Instead, she preferred to focus on low rates of producer price inflation, including for many services, which she said pointed to low rates of consumer price inflation in future.
"In my view, the evidence to err on the side of overtightening is not compelling as it often comes with hard landings," she said.
