SINCE the Brexit vote a year ago today, there has been an inevitability the Bank of England would find itself on the horns of an interest-rate dilemma.

It was clear the pound would fall as a result of the UK’s diminished economic prospects following the vote to leave the European Union. A fall in sterling pushes up the price of imports and fuels inflation.

What was also plain to see was that a Brexit vote would prove a major drag on growth. This is happening already, even before we leave the EU, as high inflation and weak nominal pay growth squeeze hard-pressed household finances more tightly and weigh on demand in the economy. Pay is, again, falling in real terms.

Meanwhile, Brexit uncertainty is giving businesses much pause for thought in terms of investment decisions. Chancellor Philip Hammond yesterday conceded that a “large amount” of UK business investment is being postponed, and urged early agreement with the EU on a “transition arrangement”.

And it is increasingly evident the massive uncertainty over Brexit is making consumers more cautious about making big-ticket purchases, whether it be cars, household goods or even houses.

Bank of England chief economist Andy Haldane, perhaps putting something of a brave face on things, this week described the overall UK economic picture as “reasonably reassuring”. This is a matter of opinion, and depends on your definition of “reasonably”, and of “reassuring”.

However, Mr Haldane was also swift to cite “important challenges”. It is these challenges that seem certain to make the task of the Bank’s Monetary Policy Committee (MPC) extremely difficult over coming months.

By last month annual UK consumer prices index inflation had surged to 2.9 per cent, well above the two per cent target, from 0.3 per cent in May 2016. UK economic growth slowed to just 0.2 per cent in the opening three months of this year, from 0.7 per cent in the fourth quarter of 2016. There has been precious little sign since of much, if any, improvement on this woeful first-quarter expansion rate.

Mr Haldane highlighted the combination of above-target inflation and sharply slower growth “as higher prices squeeze households’ purchasing power in the shops”. It is an unsavoury mixture, even if it was all so inevitable. And, as Mr Haldane observed, all of this is “before the full effects of Brexit have been felt”.

He noted the key issue for policy-makers on the MPC was “how best to navigate these risks and the trade-offs that currently exist between wages and jobs, activity and inflation”.

Mulling Brexit effects, Mr Haldane said: “One of those effects is that changes in the UK’s future trading arrangements are likely, over time, to drag on trade volumes, activity and productivity in the economy.”

Mr Haldane also cited a belief among some financial market participants and external commentators “Brexit may be neither smooth nor orderly”, adding: “If so, that could prompt a discontinuous response by consumers and companies. For example, if they were to begin building precautionary savings, this would affect growth significantly and adversely. There could be a ‘Brexit break’ in the economy.”

Given the Conservatives’ ongoing shambles, “neither smooth nor orderly” seems a most likely scenario.

Mr Haldane meanwhile spent a lot of time contemplating reasons for “surprisingly” weak nominal pay growth. He cited a tumble in trade union membership and collective pay bargaining, and rises in self-employment and part-time and temporary working as key factors in this weakness, while also noting the impact of technological advances and globalisation.

On the interest-rate outlook, Mr Haldane said: “Keeping monetary policy too loose for too long, to support jobs and activity, might run unnecessary risks with the inflation target. But tightening monetary policy too soon or too quickly, to curb inflationary pressures, might run unnecessary risks with output and jobs.”

It is in the context of this balancing act that big differences of opinion appear now to be developing among Bank of England staffers on the MPC. The apparent difference of opinion that has emerged between Mr Haldane and Bank of England Governor Mark Carney has, rightly, attracted considerable interest.

Mr Carney also gave a speech this week. He declared that, from his perspective, “now is not yet the time” to begin raising UK base rates from their record low of 0.25 per cent.

What is worthy of note is that Mr Haldane and Mr Carney appear to agree on a lot, in terms of the picture they are assessing.

Mr Carney flagged “anaemic wage growth” and said he would like in coming months to see “whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations”.

However, in spite of pay weakness and few signs this is going to change, Mr Haldane signalled this week he was likely to vote for a rise in UK base rates “relatively soon”. This wrongfooted financial markets, given he had been seen as one of the most dovish MPC members.

It is a dilemma indeed. Do you hold rates at a record low and risk inflation getting more out of control, potentially exacerbating the fall in real wages and hitting savers even harder and causing other problems? Or do you raise rates and risk putting a further dampener on already woeful UK growth, potentially costing jobs and output, at a time when Brexit is doing its damage?

Given the toxic combination of surging inflation and sharply slower growth, and as the Brexit negotiations loom large and the Conservatives wobble, it is no surprise the Bank of England’s Governor and chief economist look to have different views over what on earth is the best way forward in this uncharted territory.