RBC BlueBay Asset Management LLP is betting the Bank of England won’t raise interest rates as much as anticipated for fear of triggering a financial crisis.

The firm is positioning for the bank rate to end the year at 5.75%, rather than 6.25% priced by money market traders, Mark Dowding, chief investment officer and manager of $111 billion in assets for BlueBay in London, said in an interview on Tuesday.

“If you go too hard you’ll crater the housing market and you’ll end up with a financial crisis in the UK and stagflation,” he said. “You have to accept that it’s going to take a bit longer to bring inflation down.”

BlueBay bought three-month Sonia contracts in recent weeks to bet on less aggressive tightening. Money markets in contrast expect policymakers to raise rates further after inflation remained higher than expected in May for a fourth month.

The firm’s Sonia position is at a third of its potential capacity, and BlueBay will add to this if more evidence emerges that inflation is coming down, Dowding said. J Sainsbury Plc reported higher sales on Tuesday and said that food inflation is starting to fall, suggesting that the cost-of-living crisis could start to ease.

The BOE made a “massive mistake” in raising rates too slowly at the start of the hiking cycle and risks compounding this error if it continues to accelerate policy tightening now, Dowding said. Earlier rates rises are about to make their effect felt, he added.

“It’s like the fool in the shower,” he said, using a term attributed to American economist and Nobel laureate Milton Friedman. “You get in the shower, the hot water is not coming through so you turn it up and just when you jump in its scolding hot.”’