Strong pound has strangled UK growth, warns Bank of England rate-setter

The ascent of sterling has for example buffeted the FTSE 100, as its constituents make around 80pc of their sales overseas.

"A stronger pound reduces the value of foreign earnings when translated back into sterling using the current exchange rate", she said.

She added that "even if a firm listed on the FTSE produces and sells abroad, so that currency movements do not affect its relative costs, sales, or profits, these profits will be worth a smaller amount of sterling".

Analysis by the Telegraph found that the soaring pound had wiped £1.5bn off the profits of UK plc by this August alone.

Around 30pc of the UK’s main price index is made up of imported goods, such that “currency movements directly affect many prices and how far a family’s paycheck can go”, said Ms Forbes.

As the Bank is mandated to target annual inflation at around 2pc, movements in the value of the pound are significant for monetary policymaking.

That’s despite the channel through which the exchange rate works operating very slowly. Bank analysis suggests that changes in import prices takes three to four years to fully filter through to domestic costs.

A 10pc rise in the value of the pound would reduce the level of the consumer price index - the main measure of inflation - by about 2.7 percentage points in a shorter timespan, with just 90pc “pass through”.

A 3pc appreciation of the dollar since early 2013 has resulted in similar headaches for the Bank’s US counterpart - the Federal Reserve.

While less than a quarter of the rise in sterling, “this has already prompted analysis and discussion by the Federal Reserve Board of how this could present challenges for the economy and US monetary policy”, said Ms Forbes.

The Bank official cited comments from William Dudley, president of the Federal Reserve Bank of New York, who said in September that “if the dollar were to strengthen a lot, it would have consequences for growth”.

Typically the US government will only comments on the dollar to be made by the President and treasury secretary, as “there is such trepidation about how a single comment on the dollar by a senior official could cause gyrations in currency markets”, said Ms Forbes.

Even the individuals in those two positions “are careful never to veer from very simple, carefully vetted, and largely meaningless talking points”, she added.

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