BoE under fire for not raising interest rates

The Bank of England's inflation-fighting credibility is in serious danger due to its failure to raise interest rates, monetary policy committee (MPC) member Andrew Sentance said yesterday.

Sentance, who is the most hawkish member of the MPC and steps down next month, said the committee had allowed sterling to weaken too much, and had sent signals to markets that it was prepared to be soft on inflation.

"I do worry that the MPC's credibility and commitment to the inflation target may already have been eroded by not adjusting policy settings soon enough," he said in a speech to business leaders in Manchester.

Inflation is currently running at 4 per cent, double the central bank's target and Sentance said it had been 3 per cent or higher for most of his time on the MPC, which started in 2006.

The MPC's arch-hawk has voted for higher interest rates since the middle of last year, and called for a 0.5 percentage point interest rate rise at April's policy meeting. Two other policymakers voted for a 0.25 percentage point increase.

Sentance also reiterated his view that sterling had been allowed to depreciate too much, and that inflationary pressures from the global economy were not one-off factors and were part of a longer-term trend.