(Bloomberg) -- Andy Haldane, who was once the most hawkish member of the Bank of England’s rate-setting committee, said officials should move more carefully in raising interest rates again and think about taking much longer to reach its inflation target.

The UK central bank’s former chief economist warned that policy makers now face the “hardest yards” in reducing inflation to 2%. Haldane, now leading the Royal Society for Arts, Manufactures and Commerce, suggested they approach the goal far more flexibly and even consider taking years longer.

“Given the amount of tightening already in the system from last year, and given the flickerings of growth from a low base, I’d be going cautiously just at the moment before embarking on a further round of sharp tightening certainly,” Haldane said in an interview with Bloomberg.

The remarks are the latest from a formerly hawkish rate-setter to suggest a pivot away from the quickest monetary tightening in three decades. With inflation lingering at five times the BOE’s target, policy makers led by Governor Andrew Bailey have said they may have to raise rates again from 4%, which is the highest since 2008.

Haldane was among the early advocates for tightening policy before he left the BOE’s nine-member Monetary Policy Committee in June 2021. However, he is now taking a more dovish stance, noting the impact that the rate hikes made over the past year are having on the economy, now sputtering with close to zero growth.

His comments are especially notable because he talked about the mechanisms the BOE could use to shift away from the current goal, set out by the government, which is to achieve 2% inflation. They also jar with recent signals from the Federal Reserve and European Central Bank that point to further aggressive action with Jerome Powell warning of a higher peak in rates.

Haldane said policy makers should stick with the 2% inflation target but could consider signaling to markets a slower return to the goal — taking perhaps three or four years instead of the one or two they have currently penciled into their forecasts. That, he said, would “make those hard yards less hard.” 

“As we’ve found previously through the 70s, 80s and maybe parts of the early 90s, the hardest yards are probably grinding down from the four to the three to the two,” he said, referring to price growth. 

Inflation peaked at 11.1% last year and slipped to 10.1% when the most recent data was released. The BOE expects it to near 4% by the end of the year. Allowing more flexibility on returning inflation to target would give policy makers the breathing space to pause on rate hikes and limit the economic damage done by tighter policy.

“Hypothetically speaking, if you said actually let’s use the space and take a bit longer to re-anchor at 2%, you would want to then have a conversation about whether any further tightening is needed,” Haldane said.

“The bank could choose in an open and transparent way, subject to Treasury agreement, to take longer than the conventional one to two years to get it,” Haldane said. “They could specify that up front and say we’re going to take three years, three and a half years or four years to do this, a bit longer than usual so we can play some cushioning role. Or they could leave it slightly more open-ended than that.”

Haldane’s comments add to calls for the BOE to consider flexibility in returning inflation to the 2% target over fears that much more tightening will unnecessarily stifle the economy. NatWest Chair Howard Davies, who was a founding member of the MPC in 1997, also said on Monday that the BOE risks “unpleasant” consequences if it tries to bring inflation to the 2% target too rapidly.

Michael Saunders, the other ex BOE rate-setter to rebel over policy in summer 2021, said last week he would also vote to ease the pace of rate increases. 

Markets expect the BOE to shift down to a slower pace of rate rises at its meeting on March 23.

However, there is a divide on the BOE’s Monetary Policy Committee over whether any more action to tame inflation is required. At the hawkish end, Catherine Mann is backing more rate hikes while on the dovish side, Silvana Tenreyro and Swati Dhingra, have voted to pause on tightening policy further.

Tenreyro has warned that just a fifth of previous rate rises have already fed through to the economy. However, Mann has argued that financial conditions are “not much tighter than on average, relative to historical standards” despite the slew of BOE hikes.

Investors are betting on the BOE’s key lending rate rising a further 75 basis points from 4% currently amid signs of continued tightness in the jobs market.

--With assistance from Andrew Atkinson.

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