This week we learned that one member of the Bank’s Monetary Committee wanted to put up interest rates last month. Mr Sentance was rightly concerned that inflation remains well above target, and dares to question the Bank’s orthodoxy that because there is such a large amount of spare capacity around that there should be no price increases to worry about. This site has been querying the whereabouts of all this spare capacity, and pointing to the inflationary threat, for many months.

Although Mr Sentance predictably lost his skirmish this month, he did some good. he reminded markets that the next move -whenever it is- in UK interest rates will be up. Coming in the same week that the government announced a substantial move towards lower borrowing, this was sufficient to put the pound up a bit more against the dollar, on top of its recent rise against the Euro.

Much of the current inflation has come from the big fall in the pound in the year or so prior to the Election. A rise in the pound will soon relieve inflationary pressures on imported commodities, raw materials and finished goods, and will likely be visible to us all at the petrol pumps.

Today the Bank decided to warn us all that banks are still weak thanks to the weakness of the Euro area in general and the threats to government bonds in particular. Their remedy is yet more cash and capital to be held by the banks. That is code for saying they want the banks to lend even less to the private sector, at a time when credit is already too scarce.

Think again, Bank. We need counter cyclical regulation of the banks. This is somewhere near the low of the cycle. That means allowing banks to lend more, not forcing them to lend less. The main banks have stronger balance sheets than in 2007-9, balance sheets strong enough to allow some more lending. UK banks are not too exposed to Greek debt. Behind the scenes the Bank should be working with other European authorities to ensure no EU state does renege on its debts. The Regulators made the commercial banks buy loads of state bonds. They should now help ensure the banks are not damaged by doing as they were told to do.