Bank hawk Martin Weale calls for interest rate rise

Bank of England policymaker Martin Weale today said there was a "compelling case" for hiking interest rates unless the UK shows clear signs of sliding into a double-dip recession.

Weale joined fellow hawk Andrew Sentance in pressing for dearer money this month, after inflation shot to 3.7% in December, nearly double the Bank's 2% target - but the vote took place before shock figures showing the economy shrank by 0.5% in the final quarter of 2010.

He wrote in The Guardian that the output figure was "alarming, but not surprising", following the pattern of previous recoveries, and said there "remains a risk that inflationary expectations become ingrained as a result of continued high inflation, whatever its cause".

But he added: "Were the weakness to mark the start of a sustained new downturn, inflationary pressures would be likely to fade without a bank rate increase."

Barclays Capital chief economist Simon Hayes said: "It's difficult to see how he will change his stance over the coming months.

"Interest rate expectations are going to swing around with the data, but the Q4 number raises huge questions over the outlook and increases the chances it will be weak."