LONDON, March 8 (Reuters) - Bank of England rate-setter Swati Dhingra said on Wednesday that it would be prudent to leave interest rates on hold, given that previous increases in borrowing costs are yet to feed through into an already weak economy.
Despite recent signs that Britain's economy may be holding up better than some economists had feared, Dhingra stuck to her view that the BoE risked harming the economy unnecessarily by raising rates too high.
"In my view, a prudent strategy would hold policy steady amidst growing signs external price pressures are easing, and be prepared to respond to developments in price evolution," Dhingra said in the text of a speech to the Resolution Foundation think tank.
"This would avoid overtightening and return the economy sustainably to our 2% inflation target in the medium-term."
Along with Silvana Tenreyro, Dhingra voted last month to leave interest rates on hold at 3.5%, while the other seven members of the Monetary Policy Committee voted through an increase to 4%.
Financial markets now fully price in a further 0.25 percentage point increase on March 23 after Federal Reserve chief Jerome Powell signalled further interest rate hikes in the United States were likely.
Dhingra on Wednesday stressed that the risk of too-high interest rates were a larger threat than the risk of embedded inflation pressure.
"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.
Her views contrasted with those of Catherine Mann, another external member of the MPC, who on Tuesday doubled down on her view that higher interest rates are likely needed to lessen the risk that double-digit inflation becomes ingrained in the economy.
