Deep divisions within the Bank of England's Monetary Policy Committee were laid bare again when its leading "hawk", Andrew Sentance, an external appointment, accused colleagues of "selling England by the pound" and called for a rise in rates before May – earlier than market expectations.
In stark contrast to the cautious, dovish tone struck by the Bank's Governor Mervyn King at Wednesday's press conference on the Inflation Report, Mr Sentance said the Bank would now have to raise rates faster and more steeply than if it had taken some more modest steps earlier – a view he has expressed before.
Mr Sentance's bullishness was backed by the latest industrial trends survey from the CBI, which showed strong exports. Mr Sentance said: "We would be better placed to head off the upside pressures on inflation which are now apparent if we had taken earlier policy action, and the risk is that when policy tightening does start, it will be overdue and the MPC will be playing catch-up – which is not a good scenario for recovery prospects."
He continued: "By raising interest rates sooner rather than later to help offset global inflationary pressures, the MPC can help reassure the financial markets and the great British public that we remain true to our inflation target."
In a reference to the 20 per cent depreciation in sterling since 2008, and a 1973 Genesis album title, Mr Sentance added: "If we are to avoid 'selling England by the pound' in the sphere of monetary policy, we need to ensure that a weak or declining currency is not aggravating imported price pressures and destabilising the path of inflation over the medium-term."
Much will depend on who is appointed to succeed Mr Sentance when he steps down after the MPC meeting in May.