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(Bloomberg) -- Bank of England rate-setter Catherine Mann warned that the UK may have prematurely cut interest rates if there have been lasting shifts in wage and price setting.

The cooling in services inflation still has “a long way to go” despite slipping to the lowest level in over two years last month, Mann said on Thursday at a Reinventing Bretton Woods Committee event in Washington.

“If you have structural persistence in the relationship between wages and price formation that lasts, that is persistent and embedded, then it’s premature to start cutting until you purge those behaviors,” she said. 

The remarks suggest Mann — who opposed the BOE’s first interest rate reduction in over four years in August — remains wary of backing more cuts, despite markets expecting the bank to lower them further next month. Mann is the most hawkish policymaker on the BOE’s Monetary Policy Committee, and was one of four members to oppose the quarter-point cut to 5%.

Her comments contrasted with those of Governor Andrew Bailey who on Wednesday said that inflation has cooled faster than officials had anticipated.

Mann warned that the recent easing in price pressures may not keep inflation at the UK central bank’s 2% target in the medium term.

“In order to get to a target-consistent 2% inflation rate, services still have a long way to go,” she said. “They need to get to about 3%.”

The cautious approach comes despite data for September showing that headline inflation fell below the BOE’s 2% target for the first time in over three years. Services inflation — which the rate-setters have been watching closely for signs of domestic price pressures — dropped sharply to below 5%.

That prompted traders to ramp up bets on the BOE shifting toward a quicker rate-cutting cycle in the coming months. They currently expect a reduction next month, and put the odds of a successive move in December at just under 60%.

However, Mann was cautious over cheering the figures, saying that signals from firms’ inflation expectations are also “not quite getting us to 2% in the medium term.”

Mann said she is watching particularly closely the price of discretionary items in the services sector, such as packaged holidays and restaurants. She also highlighted the importance of spillover effects from other economies on activity and monetary policy in Britain.

Mann said interest rates will likely settle at higher levels than those seen before the pandemic, warning that there will be “a lot more inflation” going forward due to supply shocks against a backdrop of labor market frictions.