Sentance, who leaves the MPC at the end of May, has called for a base rate hike since June 2010 but has been consistently outvoted by his colleagues.
He told an audience in Manchester on Tuesday that the MPC’s credibility and commitment to the inflation target may already have been eroded by “not adjusting policy settings soon enough.”
Sentance has long argued that inflation is likely to remain above target over the next couple of years because of global growth, higher oil prices and a weak pound.
However, most of the MPC members believe the effects of inflationary pressures are temporary and that the U.K economy is too weak to cope with higher borrowing costs.
“By adopting a very relaxed monetary policy in the recession and allowing a large depreciation of the pound, the MPC has sent the signal to the private sector that it has been prepared to accommodate price increases as the economy adjusts from recession to recovery,” said Sentance.
He added: “But the longer this process of accommodation goes on, the greater the risk that it becomes ingrained in expectations of relatively high future inflation and then credibility needs to be re-established with more abrupt interest rate changes.”
