Economy boost as Bank Governor remains firm over view on inflation

A contraction in the economy in the fourth quarter was one reason why policymakers were reluctant to raise interest rates at the bank’s last meeting. A better first quarter is widely expected to trigger the rise in interest rates by June.

Mr King, who has given conflicting signals in the last month but has tended to play down high inflation as temporary, also pointed to uncertainty relating to a surge in oil prices, arguing there could be both up and downside risks to inflation from problems in the Middle East.

Mr King’s comments to a panel of MPs gave little indication he was about to vote for higher interest rates, but other members of the Monetary Policy Committee appeared less sanguine about risks to inflation.

Deputy Governor Charles Bean said he felt the upside risks to inflation had increased in recent months, raising speculation he could soon join the three other members of the committee who voted for a rate rise in February.

The combination of surging inflation and a fragile recovery has posed a headache for the Bank.