LONDON (Reuters)

Catherine Mann, an external member of the Bank of England’s Monetary Policy Committee, said in a podcast released on Monday that goods and services prices were set to rise again and wage pressures in the economy could take years to dissipate.

Mann voted against this month’s cut in interest rates and stated in the Financial Times podcast that she rated her hawkishness at 7 out of 10, down from 10 out of 10 earlier this year when she voted to raise rates further from their 16-year high of 5.25%.

“There is an upwards ratchet to both the wage setting process and the price process and… it may well be structural, having been created during this period of very high inflation over the last couple of years,” she said.

“That ratchet up will take a long time to erode away,” she added.

British inflation returned to its 2% target in May, but recent data is likely to show it has risen back above target to 2.3%, with the BoE forecasting it will reach about 2.75% later this year as the effect of last year’s fall in energy prices fades.

Mann noted that upward pressure on wages arises from the fact that wages had risen fastest for the lowest paid, compressing pay scales and creating a potential demand from better-paid workers to restore the earnings premium they previously enjoyed.

Britain’s new Labour Party government has committed to continue the previous Conservative government’s goal of keeping the minimum wage at two-thirds of median earnings, one of the highest in the world.

Some businesses might seek to match past price rises of competitors, with solid demand reducing their pressure to pass on cost savings from the recent strength of sterling, she added.

Figures released on Monday from the Chartered Institute of Personnel and Development indicated that employers anticipated raising pay by 3% over the coming year, the lowest in two years and below the 4.1% reported in a similar BoE survey.