Looming inflation is posing the biggest challenge to the Bank of England since Black Wednesday.
The Bank’s chief economist Andy Haldane has warned of a 1970’s-style economically impoverishing inflation spiral, if the Bank does not act to bear down on rising prices.
Black Wednesday, when the UK pulled out of the ERM in 1992, saw inflation rise to 12%.
If policymakers respond to the boom by choosing a “sedate” path to normalising monetary policy it would be “a bad mistake”, he wrote in the New Statesman.
Haldane will shortly be leaving the Bank to take over at the Royal Society of Arts.
