THE Bank of England warned yesterday that the recent strength of sterling should not be used as an excuse for keeping interest rates too low.
In an unexpectedly hawkish quarterly inflation report, the bank argued that sterling's 9 per cent rise since August against other currencies would probably not exert enduring downward pressure on inflation.
"The monetary factors underlying sterling's strength are probably temporary," it said.
The bank added that up to half of sterling's recent appreciation was the result of higher oil prices. This again should only depress inflation for a while.
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The bank also warned that sterling's ascent risked worsening a growing imbalance between domestic and export demand.
