Britain’s cost of living crisis could be deeper and last even longer than first feared, current and former Bank of England interest rate setters have warned.

Former Bank chief economist Andy Haldane cautioned that soaring levels of inflation could last for “years” rather than months.

Mr Haldane, who is now chief executive of the Royal Society of Arts, told LBC radio that the inflation crisis could continue into 2024 and peak even higher than the 10.25% predicted by the Bank last week.

“This won’t be come and gone in a matter of months. I think this could be years rather than months,” he said.

“It’s certainly going to be the duration of this year, and I think prospectively, well into next or even the year beyond,” he said.

Treasury Select Committee
Former Bank of England chief economist Andy Haldane began calling for a rate rise last summer as inflation ticked higher (PA)

His warning was echoed in a speech by current Bank policymaker Michael Saunders, who said inflation may soar past the 40-year high predicted in the latest quarterly forecasts.

The Bank raised rates last Thursday to 1%, which was the highest level for 13 years, and raised the spectre of a possible recession caused by the cost-of-living crunch.

Mr Saunders was one of three Monetary Policy Committee members who were out-voted in calling for a bigger hike in interest rates to 1.25%.

In his speech on Monday at the Resolution Foundation think tank, he said he thought the economy would likely prove more resilient and that rocketing inflation was the greater danger.

He said: “My hunch is that (as recently) activity will be more resilient than the MPR (Monetary Policy Report) forecast.

“For example, if consumers regard this year’s squeeze on real incomes as a one-off, they may be more likely to reduce their savings to a greater extent… especially given the sharp rises in accumulated savings and household wealth in recent years.”

He added: “I put considerable weight on risks that, unless checked by monetary policy, domestic capacity and inflation pressures would probably be greater and more persistent than the central forecast in the recent MPR.”

By not taking more aggressive action on rates now, the Bank may need to hike further to try to calm inflation, “and result in an even worse outcome for real incomes and living standards”, he said.

Mr Haldane similarly took aim at the Bank for not increasing rates sooner, with the first increase not coming until last December.

Mr Haldane was calling for a rise as early as last June.

He said: “I wish we’d done a little bit more a little bit sooner, to tighten things up, so there wasn’t quite as much money chasing quite as many goods? Yes, I do wish there had been that slightly more prompt action.”

While he was one of the first at the Bank to sound the alarm over surging inflation, Mr Haldane said the outcome had “even surpassed my worst expectations”.

“And we’re now looking prospectively at double digit rates of inflation, which is not quite back to the 70s but getting on that way,” he said.