(Bloomberg) -- Bank of England policy maker Catherine Mann has urged her fellow rate-setters to "stay the course" to carry on raising interest rates even though markets are betting on the approaching end of the most aggressive hiking cycle in three decades.
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Mann said the UK central bank is most likely to increase borrowing costs again at its next meeting rather than pause but warned of the risk of letting up in the fight against inflation too early.
"The consequences of under tightening far outweigh, in my opinion, the alternative," Mann said in the text of a speech given in Budapest on Monday. "We need to stay the course, and in my view the next step in bank rate is still more likely to be another hike than a cut or hold."
Mann is one of the most hawkish members of the BOE's nine-member Monetary Policy Committee and this month voted with the majority for a half-point hike in the key rate, which is now at 4%, the highest since 2008. Previously, she sought quicker hikes.
Last week the BOE signaled that it is approaching the end of its tightening cycle to tackle double-digit inflation. Markets have only fully priced in one further quarter-point increase to bank rate before cuts are considered by the end of the year.
However, Mann said there are few signs of a turning point for UK inflation, warning of "material upside risks" to the outlook on prices. Gilts extended a fall after Mann's comments, with the yield on two-year bonds rising 12 basis points to 3.37%.
"A tighten-stop-tighten-loosen policy boogie looks too much like fine-tuning to be good monetary policy," Mann said. "It is both hard to communicate and to transmit through markets to the real economy."
Mann said there is a turning point visible in the inflation data for the US and eurozone. However, she said the UK has only seen a "stabilization" despite two consecutive falls in the headline inflation rate.
This stabilization is "is not yet the harbinger of a turning point towards a sustainable return" to the BOE's 2% inflation target, she added.
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--With assistance from Greg Ritchie.
(Updates with details form the speech.)
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