Sterling jumps as Sentance sounds alarm over rates

Sterling rose to its highest in three months against the dollar today after comments by Bank of England's Andrew Sentance in an interview with City A.M. warning of the consequences of failing to raise interest rates.

The Bank's policy making committee is moving toward his view with Martin Weale also coming out in favour of a rise, while Deputy Governor Charles Bean warning the central bank may be

forced to hike if commodity prices rise further.

Sentance told City A.M: "The longer we delay (monetary tightening) the more there is a risk that interest rate rises when they come will have to be larger, and then there will be a bigger risk of a

shock to confidence."

He said if the inflation "genie" came out of the bottle the UK would face a "hard and painful" task to reassert price stability.

Sterling rose 0.5 percent on the day to $1.6232, its strongest since 5 November, after the comments.

Meanwhile new figures showing construction activity had bounced back in January also served to pile more pressure for rate rises.