Warning of rise in interest rates

Paul Fisher, who is a member of the Bank's rate-setting Monetary Policy Committee (MPC), said officials would like the present 0.5 per cent base rate to rise to a "normalised" level 10 times as big.

But in a newspaper interview, he said "the speed at which that happens is another thing entirely".

Mr Fisher said: "We hope people are aware that interest rates at some point will go up again and that they will head back to a normalised position. Now the speed at which that happens is another thing entirely.

"There's no reason why the pace should be more precipitative. We would only tightening quickly if the strength of the economy did demand it.

"So obviously we would not be putting up rates so quickly as to cause that sort of negative reaction.."

When asked of the goal was to get interest rates to about five per cent, he added: "Yes, but the reaction of people to those changes in rates is part of the process of information that we have to build into our forecasts and policy decision." The committee would not ignore reaction to a rate rise.

Mr Fisher said he did not think a change of either 0.25 per cent or 0.5 per cent was going to trigger a recession.

"But what we need to do is to trigger the mindset in people that that's where rates will eventually go back to," he added.

There have been concerns among the committee over inflation after it rose again in November to 3.3 per cent.