(Bloomberg) -- Bank of England policy maker Jonathan Haskel signaled he’s likely to support further increases in interest rates, saying it’s important to “lean against” the risk of inflation becoming embedded in the UK.

“I prefer to lean against the risks of inflation momentum,” he said at an event in Washington. “As difficult as the economy’s current conditions are, embedded inflation would be worse. Further increases in Bank rate cannot be ruled out.”

The remarks follow surprising strong inflation figures, which prompted traders to boost bets the UK central bank will extend its longest hiking spree in four decades through the summer. That data quashed hopes the BOE would follow the US Federal Reserve in considering a pause in the tightening cycle.

“We’re monitoring very closely the inflation, persistence,” he said. “That’s the key thing that we’re looking at.” He added that, “if we do see evidence of more persistence, we’ve said and we’ve been very upfront about it, that tightening is going to be needed.”

Haskel used the speech to dismiss concerns that so-called “greedflation” — where businesses boost prices unnecessarily - is fueling the stronger-than-expected price rises in the UK. Instead, he pointed to a number of other things driving inflation higher, notably used car prices that may turn out to be “a blip.”’

“The data shows little evidence of UK inflation being disproportionately due to firms raising prices,” Haskel said. 

He cited data showing that the workforce’s share of national income has not ceded ground to capital compared to pre-pandemic levels.

However, Haskel conceded that there could be differences on greedflation between sectors, pointing to the surge in profits in the oil and gas industry. 

Former BOE rate-setter Michael Saunders also played down greedflation worries in an analysis last week. He found that profit margins in the manufacturing and services sectors have slipped below the long-run average.

Haskel noted that the UK has a much tighter labor market than it did before the pandemic after hundreds of thousands of people dropped out of the workforce, many citing ill health. That helped give workers bargaining power to ask for higher wages.

“The labor share increased somewhat during the pandemic, reducing the hit to aggregate real labor income,” he said. “The labor share has begun to move back towards its long-run average in recent quarters, meaning that capital has gained relative to labor recently, although in aggregate the labor share is still just above pre-pandemic levels.”

“Looking forward, the labor market is still very tight in an absolute sense: for example, the vacancies-to-unemployment ratio remains historically very high, as does unit wage growth,” he said.

(Updates with comments from the speech and context from third paragraph.)

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