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In the first public comments from a Bank official since the new Labour government took office, Jonathan Haskell, an external member of the Bank’s Monetary Policy Committee (MPC) and professor of economics at Imperial College in London, called for caution despite expectations interest rates will be reduced.

In a speech at the Economic Statistics Centre of Excellence in King’s College, Haskell stressed there were “considerable encouraging signs” related to inflation, including that UK Consumer Price Index (CPI) inflation dropped to the 2% target rate last month.

But he added: “However, the wage-price system in the UK has been subject to a sequence of enormous shocks over recent years.

“The playing out of those shocks through the economy, and the continued tight and impaired labour market, means that inflation will remain above target for quite some time.

“I would rather hold rates until there is more certainty that underlying inflationary pressures have subsided sustainably.”

June’s decision to keep the rate on hold ‘finely balanced’

Haskell voted to leave interest rates on hold at the Bank of England’s last meeting in June. His latest comments suggest he is not likely to opt for a cut in August, which would be his last meeting on the MPC.

The Bank in June voted 7-2 to keep interest rates on hold, although minutes from the meeting showed that the decision was “finely balanced” – a sign that an August rate cut remains in play.

This would follow a move by the European Central Bank, which cut its key deposit rate from 4% to 3.75% in June.

Rates have been on hold at their 16-year-high for almost a year, even though inflation fell back to its 2% target in May.

Some economists have been calling on the Bank to cut rates for months, although Bank forecasts suggest price rises are likely to pick up in the second half of this year.