In an exclusive interview on Jeff Randall Live, Mr Sentance said he was concerned that the British public is losing faith in the Bank’s ability to reign in soaring inflation.
“I think is that there is a big risk now emerging to credibility of the Bank,” he said.
“If inflation does not come down in the way that the Bank is suggesting – and I think there is a big risk that is the case – than that is going to have a big knock on effect on the credibility of the bank’s commitment to its inflation target.”
Mr Sentance reached the end of a five-year tenure as a Bank of England policymaker on Tuesday.
Over that period, inflation has been above the Government’s 2% target much of the time, with CPI currently standing at 4.5%.
For the past 12 months, Mr Sentance has called for a rise in the historically low interest rate in an attempt to control inflation.
Two other members of the nine-strong Monetary Policy Committee (MPC) have joined his stance, but so far they have been outvoted by those who want to keep the rate at 0.5%.
Mr Sentance told Sky News: “I can accept an argument that says because growth in the economy is fragile, we’re only just coming out of recession, we should be very careful with interest rate increases.
“But what I find difficult to see is a Monetary Policy Committee not responding at all when inflation is so much above target and the economy has turned round so far from the situation we were in a couple of years ago when we brought interest rates down to half a percent.”
The hawkish economist added that he did not expect to see inflation fall to the 2% target by the middle of last year, due to pressures in the global economy, wage increases and a follow-through of the fall in the pound.
He warned that it was important not to forget interest rates are at the lowest level in the 300-year history of the Bank of England, and should be moved up gradually to reflect the changing economic situation.
“The worry I have is that if that doesn’t happen, we will face a situation where interest rates must move much more sharply – and there’ll be a bigger threat to growth in the future,” he said.
Source: Sky News