The Central Bank meetings that will be held in the first week of May are each going to be crucial in their own right, but combined will set the tone for the financial markets for the rest of the year.

The Bank of England’s MPC appears to be unable to commit to a fight against inflation given the concerns being expressed by some of its members about contributing to a slowdown in the economy which eventually becomes a recession.

Catherine Mann, one of the newer members of the Committee, spoke yesterday of her concerns that rates will have to rise at an even faster rate than is currently being predicted, since the current pace of tightening may not dampen demand sufficiently to stop wage inflation becoming ingrained in the economy.

At the time of the first increase in interest rates in February, Mann voted for a fifty basis-point increase, believing that front loading the tightening of monetary policy would add to its effect. It turned out she was in the minority, and she fell back into line in March when he voted for the twenty-five-basis point increase that was eventually agreed.

The Bank of England, which has been independent of Government since 1997 when the Monetary policy committee was formed, faces both an opportunity and a challenge to cast off its conservatism and act to bring the economy back under control at its next meeting.

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