According to a report, Bank of England rate-setter Megan Greene said the UK economy's stronger-than-expected growth and resilient labor market show the central bank has not done enough to tame inflation.

The external member of the Monetary Policy Committee, speaking to the Atlantic Council during the International Monetary Fund meetings in Bangkok, said rates should be higher than the current 3.75%, and warned colleagues not to rely on financial markets to do the tightening for them.

Her remarks came after the IMF raised its forecast for UK economic growth this year from 1% to 1.3%. "Based on the GDP data published, monetary policy is not sufficiently restrictive at present, and there is limited spare capacity in the economy," she said. "Some recent labor market data also suggest that slack in the labor market may have peaked, meaning the jobs market remains relatively strong."

Greene is known as one of the more hawkish members of the Monetary Policy Committee. Over the past few months she has consistently voted for a 25 basis point hike to 4% to guard against a wage-price spiral, but her proposal has always remained in the minority on the nine-member committee.

UK inflation currently stands at 3.1% and is expected to reach around 4%, double the 2% target, due to higher energy prices caused by the Iran conflict. Markets expect the Monetary Policy Committee to raise rates at its next meeting in November.

Some MPC members believe that tighter financial conditions and higher household borrowing costs are curbing inflation, but Greene warned that taking a hands-off approach amounts to excessive complacency. "At some point, the central bank has to match its words with actions. If the market has already priced in a rate hike and you ultimately do not raise rates, then the yield curve will inevitably shift," she said. "I do not believe in the idea that a strategy can rely on a premium to do the work for you. I think the central bank actually needs to set out a strategy."

Greene said she worries that the longer inflation stays above target, the more it will seep into people's expectations for prices and wages, leading to a more persistent problem. "What we have learned from past rounds of supply shocks is that when you go through consecutive bouts of inflation, it really does change people's behavior," she said. "What worries me is that we have already experienced successive supply shocks, and now we are facing another one."

She pointed out that the safest approach is to act preemptively by raising rates to "guard against second-round effects." If it later turns out that the hikes were unnecessary, "the central bank can adjust its policy direction and still bring inflation back to target, while the impact on economic activity will not be too severe."

When asked about the UK budget on October 28, she said the Bank of England will pay close attention to whether the announced policies will push prices higher. For now, "government spending has played a considerable role in sustaining disinflationary pressure."