Bank of England official raises prospects for early interest rate hike

Rate-setting member Kristin Forbes outlines how failure of strong pound to hold down inflation could prompt early rise

A senior Bank of England official has raised the prospect of interest rates rising sooner than expected if economists are proved wrong about the power of a strong pound to hold down inflation.

Kristin Forbes, one of the nine rate-setting members of the Bank's monetary policy committee, questioned whether current economic models were accurately reflecting the relationship, or "pass-through", between exchange rates and the outlook for inflation. That, in turn, had important implications for monetary policy, she said in a speech.

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