The most dovish rate-setter at the Bank of England has pushed back against the rising pressure from his colleagues to vote for higher interest rates, further underlining a growing split between top policymakers.
Gertjan Vlieghe, an external member of the monetary policy committee (MPC), stood firm on his belief that bank rate, the key interest rate offered by the Bank, should remain at 0.25 per cent despite rising inflation.
He told the Independent: "This is an environment where a premature hike would be a bigger mistake than one that turns out to be slightly late".
At the last MPC meeting Vlieghe was one of five members voting for no change in the Bank’s stimulus plans.
Three dissented from that decision, citing the surge of inflation to 2.9 per cent in May. Since then the Bank’s chief economist has indicated he might change his mind and support a hike at the next meeting in August.
Bank of England governor Mark Carney has remained firmly against raising rates, although last week he acknowledged the splits on the MPC with a speech that indicated a hike is possible if business investment picks up.
However, Vlieghe said he does not expect higher business investment to offset the slowdown in consumer spending as wages lag behind price increases. He has previously said inflation of as much as 3.5 per cent might be tolerable if growth were threatened by higher rates.
"I haven’t really changed my mind," he said. "I think the consumption slowdown is here, it’s not over. I don’t think there’s going to be a sufficient offset from investment and net exports to compensate for that."
Vlieghe acknowledged that keeping rates on hold did entail further risks, but said the more dangerous path was a premature increase.
He added: "Of course if the data turns out stronger I do agree that a higher rates is warranted but my central forecast is that’s not going to happen in the near term."