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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 said in the Financial Times podcast that she put 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 data this week is likely to show it rose back above it to 2.3% and the BoE has forecast it will reach about 2.75% later this year as the effect of last year's fall in energy prices fades.
Mann said she saw upward pressure on wages from the fact that wages had risen fastest for the lowest paid, compressing pay scales and creating a potential demand over the coming years from better-paid workers to restore the earnings premium they previously enjoyed.
Britain's new Labour Party government has said it will continue the previous Conservative government's goal - achieved last year - of keeping the minimum wage at two thirds of median earnings, one of the highest in the world.
Some businesses too would seek to match competitors' past price rises and solid demand also meant they would feel less pressure to pass on cost savings from recent strengthening of sterling, she added.
Figures out on Monday from the Chartered Institute of Personnel and Development showed that employers expected to raise pay by 3% over the coming year, the lowest amount in two years and below the 4.1% in a similar BoE survey.
(Reporting by David Milliken in London, Harshita Meenaktshi in Bengaluru; Editing by Kim Coghill and Sarah Young)
