Besley says inflation must be contained

LONDON (Reuters) - Interest rates must be kept at a "suitable level" until price pressures have cooled, Bank of England policymaker Timothy Besley said on Tuesday, predicting inflation to start falling towards target next year.

Writing in The Sun newspaper, the only Monetary Policy Committee member to vote for higher interest rates last month said keeping inflation at a two percent target rate was "not easy in the current economic climate".

"This spiral has to be nipped in the bud and that means having interest rates at a suitable level until the threat of higher inflation has passed," he wrote.

"All being well, inflation will fall again next year and will be much closer to the two percent target by the end of 2009. But that will only happen if people don't chase inflationary wage increases."

The comments suggest that Besley is in no hurry to change his hawkish stance just yet, despite forecasts from the Bank last week showing inflation should fall below the 2 percent target in two years' time if rates stay put at 5 percent.

Analysts expect another split when the minutes of this month's rate meeting are published on Wednesday, with Besley seen repeating his call for higher rates, David Blanchflower wanting a cut and the remaining seven keeping rates steady.

Inflation is currently running at an annual rate of 4.4 percent -- the highest since the Bank was given the power to set borrowing costs -- but is expected to cool as demand slows and commodity prices stabilise.

But worries that Britain could be entering its first recession since the slump of the early 1990s have stolen the limelight from sharply rising prices in recent weeks.

"Some have looked to the MPC to cut its interest rate to help," Besley wrote. "But our job is to fight inflation because that's the best basis for the economy to grow, create jobs and allow living standards to rise."

(Reporting by Kate Kelland, Editing by Matt Falloon and Victoria Main)