Bank of England’s newest monetary policy committee member Gertjan Vlieghe

This might make consumption move sensitive to income shocks than in the past and might also make households more sensitive to rate increases.

Britain’s jobless rate has fallen to its lowest level in more than seven years but pay growth was a bit slower than expected, suggesting the labour market is not hot enough to speed up a Bank of England interest rate hike.

His comments came as September inflation figures showed year-on-year growth in the consumer prices index falling below zero to minus 0.1 per cent. This is the second time this year that the CPI has turned negative and equalling the lowest rate of inflation since March 1960. “However, as the market is rather cautious about rate hike expectations, not least due to its recent experience with the hesitant Fed, any positive momentum for Sterling is likely to be limited in the end”, says Commerzbank.

The total earnings of workers – including bonuses – rose by 3.0 percent, edging up from the three months to July, but short of a forecast of 3.1 percent in the Reuters poll. “There are risks to either side, but given the current low levels of inflation the risks are probably skewed to the downside”, Vlieghe said in a series of written answers to questions from lawmakers in Britain’s parliament.

The economist defended the arrangement in front of parliamentarians, saying the scheme was the “equivalent to receiving dividend from a public company” and had been approved by both the Bank of England and the Treasury before his appointment. He told MPs he was in line to receive a “couple of hundred thousand pounds” from the sale.

Andrew Tyrie, MP and chairman of the TSC, said the Bank of England could have done better to “protect” Mr Vlieghe from the negative press attention he subsequently received.

This just gives Federal Reserve Chair Janet Yellen more of a headache when the central bank meets this month as it looks to raise interest rates as it has repeatedly claimed it will this year.

“We absolutely have to take into account that we are operating in a global environment, which is adverse, so to speak, in that there are headwinds to growth”, he said. “We would need to see more protracted price falls to really start worrying about serious deflationary risks”, Investec’s chief economist Philip Shaw said.