MNI BRIEF: BOE Overtightening The Greater Risk Now: Dhingra

The Bank of England overtightening monetary policy poses a more material risk through potential negative impacts from increased borrowing costs and reduced supply capacity going forwards, Bank of England Monetary Policy Committee member Swati Dhingra said Wednesday.

Dhingra said the BOE has already hiked interest rates by nearly 4 full percentage points since December 2021 and given estimates that policy lag on inflation is 'well over a year, there is reason to expect therefore that demand will be subdued and not inflame inflation further.

"My conclusion is that, given little evidence of further cost-push inflation, further tightening is a bigger risk to output and the medium-term inflation target," she said.

"Even after a year and a half of above-target inflation, there is little evidence for such cost-push inflation beyond what might be expected following an unprecedented terms of trade shock," Dhingra said at an event hosted by the Resolution Foundation.