Mr Spencer said: "It's a bit rich for the Prime Minister to get involved when he's the one responsible for the VAT increase. To add to that [by raising rates] would be utter folly."
He said the Bank must "hold its nerve [and leave rates at 0.5pc] until it is clear that the economy is taking the austerity programme in its stride and is making a full recovery".
Rate rises would inflict serious hardship on already cash-strapped households. Real disposable incomes fell by 1.2pc last year, after the effects of inflation, and are forecast to decline through 2011.
Tax rises and higher commodity prices are having "the effect of depressing household spending as they raise inflation and it would be perverse to add to this effect by tightening monetary policy", ITEM said.
Mr Spencer argued that underlying inflation is below target, once the tax effects are stripped out, at 1.6pc, which "suggests that underlying pressures are well contained". Inflation is being driven by one-off factors, he said.
Raising rates before the economy is ready to stomach them would be potentially crippling, he warned. Interest rate rise would put factories at risk
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