Bank of England’s inflation failure means higher interest rates, says MPC member Andrew Sentance
Mr Sentance said the Bank had failed to persuade people it was serious about keeping prices in check, risking a wave of inflationary wage demands.
That would eventually force the Bank to set interest rates higher than if it had acted sooner, he said.
Mr Sentance issued his warning in a speech in Manchester ahead of official statistics today that economists forecast will show the recovery remains fragile.
City analysts believe the economy grew by 0.5 per cent in the first three months of the year.
George Osborne, the Chancellor, told Cabinet ministers yesterday that the economy was “on the right track” but securing a robust recovery remained “difficult”.
Inflation stood at 4 per cent in March and has been above the Bank’s 2 per cent target for more than a year.
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