Sentance wastes no time in attacking Bank estimates

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A day after the Bank published its quarterly forecasts - which predict inflation hitting 4.5% early this year - Sentance said his warning about bigger rate rises eventually being needed to control spiralling costs "is being borne out by events".

The rate-setter, who has been voting for rate rises since June last year, said the Bank is over-estimating the impact of economic slack on dragging down prices, as well as underplaying pressures on inflation from abroad. The Bank's medium-term assessment of inflation is "too optimistic" he warned.

The latest salvo from Sentance widens the chasm on the Bank's rate-setting committee with Martin Weale joining him in calling for hikes.

Bullish manufacturers added weight to Sentance's case today with the CBI's latest industrial trends survey showing firms ready to hike prices in the months ahead. A 32% balance of businesses expect to put up prices, the highest since July 2008.

Total orders bounced back from a weak January while export orders are at their strongest since 1995, but chief economic adviser Ian McCafferty said: "There is still worrying evidence of strong inflationary pressures in the pipeline."