BANK of England policymaker Professor Tim Besley has reinforced his hawkish stance on interest rates, arguing that they need to remain high if inflation is to be "nipped in the bud".
His comments came ahead of the publication today of minutes from the bank's August meeting, where rates were held at 5 per cent.
Besley, below, was the only member of the nine-strong monetary policy committee (MPC) to call for an immediate rate h
ike at last month's meeting.
Some economists believe he may have been joined by a colleague in backing a tightening when the minutes are revealed.
Writing in the Sun newspaper yesterday, Besley warned against a return to the soaraway inflation of the era remembered for films like Saturday Night Fever and the television series Starsky & Hutch.
"It would be easy to give in and let inflation get out of control – that's what happened in the 1970s," he said.
"Everyone wants to protect their living standard. But if everyone does it, prices will just go up again as businesses try to cover their higher costs.
"Then we'll all be back to square one, but with inflation still high. This spiral has to be nipped in the bud and that means having interest rates at a suitable level until the threat of higher inflation has passed."
July's minutes revealed the first three-way split on the direction of interest rates since May 2006, with the decision described as "a difficult one" for all nine policymakers amid slowing economic growth and creeping inflation.
Besides Besley opting for a rise in borrowing costs, arch-dove David Blanchflower voted for a cut, leaving the remaining seven members arguing for a freeze. Most analysts had been expecting an 8-1 vote in favour of a hold, with Blanchflower the sole rebel.
Last week, official figures showed the key Consumer Prices Index (CPI) measure of inflation hitting 4.4 per cent in July – more than double the MPC's 2 per cent target.
With that figure expected to top 5 per cent before the end of the year, Investec analyst David Page said of the latest minutes: "We expect another member joined Besley in backing a tightening this time."
• Consumer inflation expectations are running at their highest level since 1992, according to a report released yesterday.
The Barclays survey of inflation expectations for August, which polled nearly 2,000 people, showed inflation was seen at 4.8 per cent in two years' time, the highest since comparable records began in 1992 and up from expectations of 4.7 per cent reported in the June survey.
The full article contains 438 words and appears in The Scotsman newspaper.
