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(Bloomberg) -- Bank of England Governor Andrew Bailey thinks a renewed bout of inflation is nothing to worry about. Former policymakers are less convinced and say the central bank may need to pause its interest-rate cutting cycle.

“If this carries on in the next couple of months, then I would be nervous of making a further cut,” said Martin Weale, a professor at King’s College London who served on the Monetary Policy Committee between 2010 and 2016.

At issue is whether a resurgence driven by what Bailey says are “temporary” factors, mainly energy costs, will lead to more troubling second-round effects — where workers bid up wages to protect their living standards and companies raise prices to protect their margins.

Bailey and his rate-setting panel think that’s unlikely and have held out the prospect of further cuts. But with some economists predicting inflation could top 4% and firms facing a huge increase in employment costs, ex-officials caution against dismissing the possibility of price pressures becoming entrenched.

“This is not a time to take risks in my opinion, and I think cutting rates would be a risk,” said DeAnne Julius, who was a BOE rate-setter between 1997 and 2001. “Businesses that can raise their prices are going to do so to try to cover at least part of the additional cost that they’re facing starting April 1 when the national insurance increase comes in and the minimum wage goes up.”

Weale added: “We’ve got an adverse trend in wages. We’ve got an adverse trend in service prices. We’ve got an adverse trend in core inflation, and if you put all those together, then I think it has to be a source of worry. If you look at what’s happening to wages, it suggests expectations in the labor market haven’t come back to normal.”

Hanging over the debate are memories of Bailey and his international peers using another T word — “transitory” — to describe the post-Covid inflation surge, only to be caught out by a far bigger and more prolonged bout of price instability. The worry is that there are parallels this time around.

After hovering above the 2% target for much of last year, inflation is once again on the rise. It hit a higher than-forecast 3% in January and is expected by the BOE to peak at 3.7% later this year — a percentage point higher than projected in November.

The MPC has nonetheless been on a once-a-quarter rate-cutting path since August and is guiding investors toward more reductions at a “gradual and careful” pace. Markets are pricing in another two by November and a 25% chance of a third by year-end.

Some economists think the BOE is underestimating the inflation coming in the next few months.

Deutsche Bank now expects inflation to hit 4.25% over the summer. Its chief UK economist, Sanjay Raja, said this “raises the risk that rate cuts may end up being more backloaded than frontloaded.”

“All will depend on how the labor market evolves, but given our projections, we think it’s very possible to see the MPC staying on the sidelines through spring,” he said.

Bailey has taken comfort from the expected increase in inflation being underpinned by regulated prices, such as energy, and signs of a cooling labor market that may limit the bargaining power of workers. A survey by the CBI business lobby published Monday shows private-sector firms expecting activity to fall for a fourth straight quarter.

But Bailey has not totally ruled out additional second-round effects. Private-sector-wage growth is running at over 6%, inflation expectations are creeping higher and households may be more sensitive to prices after the recent squeeze on their living standards.

Deputy Governor Dave Ramsden is also alive to the risks. In a speech on Friday, the usually dovish policymaker said wage settlements had been stronger than he anticipated and weak productivity was limiting how quickly the economy can grow without triggering inflation.

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“What ‘careful’ does is that it gives the central bank more discretion to basically space those gaps between cuts even wider,” said Katharine Neiss, deputy head of global economics at PGIM Fixed Income and a former BOE economist.

“If they get any kind of hint that this thing is running away out from under them, they’re going to sit tight and, I think, just hold off on continuing on their cutting path.”

However, some remain more relaxed on inflation given the darkening growth and employment picture both at home and abroad.

Michael Saunders, a member of the MPC from 2016 to 2022, played down the prospect of more second-round effects given the “sluggish” economy and “weakening” labor market.

“I don’t like the language of ‘looking through’ an inflation pickup because it implies you put no weight on it, and you should put some – just not very much,” said Saunders, who is now senior policy adviser at Oxford Economics.

“I think it is likely to be temporary. Headline inflation is being driven up by partly energy and food — classic temporary factors — and partly services,” he said.