The Bank's Monetary Policy Committee (MPC) was widely criticised when it raised the official cost of borrowing from 5% to 5.25% last month.

The rise came despite inflation still running well below the Government's 2.5% target rate and was seen in many parts of the country as being an over reaction to the sharp rise in house prices being seen in London and the South East of England.

Raising interest rates is the tool used by the Bank to slow down the economy when it wants to reduce inflationary pressures.

Northern jobs a price worth paying

It has also been seen as one way of slowing the fast rise in property prices in the South East because it increases mortgage rates. Bank chiefs fear a repeat of the 1980s housing-led boom, which was followed by bust.

But last month's rise sparked complaints that not enough weight was being given to the difficulties being experienced by businesses in some other regions of the UK.

The issue has been controversial since Bank of England governor Eddie George implied last year that higher unemployment in the North East of England was a price worth paying for cooling down the overheating South East economy.

In a speech to the Scottish Council Development and Industry in Edinburgh, the deputy governor, Mervyn King - seen as the leading supporter of higher interest rates on the MPC - refuted claims that the increase had been "premature".

He said: "We would describe it as pre-emptive. It was prompt action to head off inflationary pressures in the future and so lower the level at which interest rates might otherwise need to be set."

In particular he warned that the dampening effects on inflation of the strong pound and falling import prices could not be expected to last and that it had been essential for the MPC to act.

"Yes, it has been tough - indeed remains tough - for some industries, especially agriculture, tourism and parts of manufacturing. But there has not been an overall recession," he said.

'We are trying to be boring'

"We want to make people realise that the stability that we have is extremely important and we want to go on doing that. And it's easy to explain that to people who lived through periods of instability like the 1970s," he said.

"But memories ... fade, and people say 'oh, policy is not very exciting, it's very boring. Can't we use monetary policy to promote one sector or one region?' Our job is to say 'no, policy ought to be boring. that's what we're trying to be, boring.

"I can assure you that policy is not set with the South East of England in mind. But equally, it is not set either in the sole interest of the North East of England or Scotland. It is set for the United Kingdom as a whole," he said.