The unexpectedly low inflation rate announced this week is likely to be shortlived and should not be seen as a reason to keep interest rates on hold, a leading Bank of England policymaker warned yesterday.
Statistics showed that inflation, on the consumer price index measure, fell from 4.4 to 4 per cent in March. But Andrew Sentance, the Monetary Policy Committee (MPC) member who has most consistently campaigned for base rates to be raised from their record low level of 0.5 per cent, said weakness in the pound was likely to mean inflation rising again – possibly to 5 per cent or higher.
"There is still quite a bit of evidence that there's some further upward pressure on inflation to come," Mr Sentance said. "[There will be] more imported inflation than we would have if the pound was a bit stronger, and that's reinforcing the squeeze on consumer spending."
Mr Sentance is one of three members of the MPC who voted for an interest rate rise in March. The minutes of the committee's April meeting, to be published next week, are expected to show the same split.
The lower inflation figures have seen some economists reconsider the consensus view that the Bank will finally raise rates at the May MPC meeting. That discussion will be Mr Sentance's final chance to convince colleagues of the need for a tightening of policy, since he is then due to step down from the committee.