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The Bank of England must slash interest rates to shore up the struggling economy, a top policymaker has warned, rejecting Andrew Bailey’s call for “ gradual and careful ” steps on borrowing costs.

Catherine Mann, a member of the Monetary Policy Committee, said the economy was already weak and set to get worse as families and businesses cut back on spending.

Ms Mann warned of “extensive weakness” in the private sector and consumer demand. The Bank’s surveys show bosses are slashing jobs “as firms address the multi-year accumulation of increased labour costs”, she said.

A former chief economist at the OECD, Ms Mann said Donald Trump’s tariffs wars and volatility in financial markets meant the Bank needed to act decisively to bring down borrowing costs.

Ms Mann said: “With substantial volatility coming from financial markets, especially from cross-border spillovers, the founding premise for a gradualist approach to monetary policy is no longer valid.”

In a speech in New Zealand, she said: “Monetary policy must navigate through choppy financial markets, shock-ridden economies, and sticky expectations. Larger cuts, such as the one I voted for in the latest meeting, cuts through this turbulence, with the objective to more effectively communicate the stance of policy and influence the economy.

“At the same time, keeping monetary policy restrictive for longer allows me to evaluate developments on inflation persistence. This combination is an activist monetary policy strategy.”

Ms Mann voted for a bumper 0.5 percentage point rate cut in last month’s policy meeting but she was outvoted in a seven-to-two split. The majority, including Mr Bailey, the Governor, backed a 0.25 point cut to 4.5pc.

Her call for larger cuts runs counter to the “gradual” approach advocated by the Governor. Mr Bailey has called for “a gradual and careful approach to the further withdrawal of monetary policy restraint”.

Ms Mann was previously considered a ‘hawk’ who favoured high interest rates but has now decided the time has come for sharply lower borrowing costs.

Her fears stem from the Bank’s surveys of business leaders. Those surveys include questions on next month’s £25bn increase in the National Insurance contributions paid by employers on their workers’ pay packets. The results indicate more than 50pc of companies expect to employ fewer workers as a result. 61pc expect to charge customers higher prices to cover the cost of the tax, and 63pc anticipate lower profits.

People have begun to save more to guard against fears they will lose their jobs. Extra saving, while potentially good for each individual household’s position, risks draining more spending from the economy, slowing growth and leading to more unemployment.

Ms Mann said: “Already high savings rates, associated with buffers against volatile purchasing power and mortgage refinancing costs may be further bolstered by an unemployment-risk buffer.”

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