Monetary Policy Committee external member Andrew Sentance believes CPI inflation could rise above 5 per cent this year.
Giving a speech at the Confederation of British Industry’s annual lunch in Suffolk today, Sentance, who has called for the base rate to be increased since last June, said gradual increases in interest rates would counter inflation and avoid an “abrupt” rise in the future.
His announcement follows news that CPI inflation had jumped to 4.4 per cent in February, its highest level since 2008. In February, Bank of England governor Mervyn King suggested inflation of “somewhere between 4 and 5 per cent” in the coming months.
Sentance said: “We have heard the news today that CPI inflation has risen again – to 4.4 per cent – and it could easily rise to 5 per cent later this year.”
“In this environment, with inflation running very considerably above its target level and set to rise further, failure to take timely monetary policy action risks a more abrupt and destabilising rise in interest rates in the future.”