Ex-Bank of England governor Mervyn King has warned that further interest rate hikes could push the UK into a recession, as he criticized the central bank's disregard of credit market signals predicting a sharp fall in price growth.
The remarks come ahead of a widely expected rate increase at the next meeting of the BoE's monetary policy committee on August 3.
Making the comments in an interview on a Bloomberg podcast, King said the MPC could tighten monetary policy too far if they pushed interest rates above the current 5%.
He said the central bank had ignored signals from money supply data, which pointed to higher inflation coming out of the pandemic.
"The risk is that having ignored money when inflation was rising, they’re now ignoring money when inflation is actually about to fall. What we could see, therefore, is a mistake in both directions over a period of three or four years."
The remarks are hardly a surprise, as most central banks hiking rates this year have acknowledged that a recession is a risk they are willing to countenance as part of their efforts to reduce multi-decade high inflation.