UK households have suffered from “twelve years of inflation in a little over two years” a member of the Bank of England has said, warning of the “scarring” effects of rising prices on consumer spending.

Catherine Mann, an external member of the monetary policy committee, said prices in the economy had surged by 30 per cent since 2019 after inflation hit its highest level in nearly four decades during the global energy crisis in 2022 and the pace of price changes has remained stubbornly above the Bank’s 2 per cent target rate.

She said the UK was suffering from “persistently persistent” inflation and a weak economic growth outlook. Despite worries about households choosing to save more to cope with inflation and fears of future inflation, she said she still favoured keeping interest rates restrictive.

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“In light of elevated inflation and expectations, maintaining restrictiveness for longer would be appropriate,” Mann said in a speech at the Resolution Foundation on Thursday. “High inflation itself is behind scarring, income uncertainty and weak consumption growth. Therefore, monetary policy needs to continue to focus on reducing inflation to achieve the environment of price stability. Then households can return to their normal consumption-savings behaviour, which is conducive to stronger consumer demand.”

The Bank has cut interest rates five times since last August, bringing the base rate down to 4 per cent but monetary policymakers are not expected to reduce borrowing costs again this year, according to market forecasts, given that inflation is on course to peak at 4 per cent in September. Mann voted to keep the base rate unchanged last month, as did six more of the nine-strong committee, and in August was part of a four-strong minority that did not want to reduce borrowing costs from 4.25 per cent.

A measure of household real disposable income has also fallen below historical averages in recent years. The government has frozen income tax brackets since 2022 and high inflation has forced more workers into the highest tax bracket. Mann said that nearly two thirds of the gap between real incomes and disposable incomes was due to taxes “and 13 per cent by employee national insurance contributions”.

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UK households are choosing to save more of their incomes than at any time in the recent past. The official savings rate is about 5 percentage points higher than historical averages and rose to 10.7 per cent in the three months to June, reversing the first fall in the rate since 2023, according to official figures.

The UK’s high savings rate and low consumption rate were due to scarring from past inflationary shocks, high interest rates discouraging spending over savings and uncertainty about another surge in prices. Food prices have recently risen above 5 per cent, surprising the Bank and having an outsized impact on shoppers’ experience of inflation.

“Research shows that the rapid increase in the price level has scarred consumers even as inflation has moderated and real income growth resumed,” Mann said.

Megan Greene, another external member of the committee, said on Thursday that central bankers should consider responding more forcefully to supply shocks such as energy and food price rises in order to contain their impact on broader inflation.