An LSE professor has been appointed to replace Kristin Forbes on the Bank of England's MPC

Bank Of England Interest Rate Decision
Kristin Forbes' tenure at the rate-setting MPC ends this month. (Source: Getty)

London School of Economics professor Silvana Tenreyro has been appointed as the newest external member of the Bank of England's monetary policy committee (MPC).

Tenreyro, who teaches macroeconomics and international economics, will replace noted hawk Kristin Forbes on the rate-setting MPC.

The chancellor said Tenreyro will begin her three-year term on 7 July.

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Bank of England governor Mark Carney added: “I am delighted to welcome Silvana Tenreyro to the Monetary Policy Committee and am very much looking forward to working with her.

"Her extensive and varied academic experience – on the monetary transmission mechanism, the dynamics of productivity, trade, housing issues as well as wage dynamics, to name just a few – will be invaluable to the Committee as it seeks to promote the good of the people of the United Kingdom through maintaining monetary stability.”

In an interview with the FT in January, Silvana said she was pessimistic about Brexit, and said the MPC's decisions will be based on the outcome of negotiations.

Read more: Kristin Forbes prepares to step down from Bank of England MPC

"Certainly the terms for Brexit will affect where the economy ends up - and the subsequent actions of the BoE," she said.

She also said: “My pessimism regarding Brexit has not moved much: I think it will have a negative impact on the UK economy and Europe more generally.”

While there is little in the way of detail on her specific view on British monetary policy in the public domain, this negative view of Brexit may make her “less willing to to press for a rate hike now”, according to Peter Dixon, global financial economist at Commerzbank.

Tenreyro began her degree studies at the National University of Tucuman in Argentina, before completing a PhD at Harvard University under renowned economist Ken Rogoff.

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She already has varied experience at central banks, having worked at the Federal Reserve Bank of Boston and the Bank of Spain, as well as being an academic visitor over the past two years. She served on the monetary policy committee of the Bank of Mauritius between 2012 and 2014, where she voted to cut the central bank’s key interest rate in 2013 in order to support growth.

Tenreyro’s work on the transmission of monetary policy to the broader economy has been cited in the past by US Federal Reserve chair Janet Yellen.

Meanwhile in 2013 she published a paper with Gregory Thwaites, head of international research at the Bank of England, arguing lower interest rates were not effective during a recession, arguing instead for higher fiscal spending.

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Tenreyro joins the MPC at a time of a growing split among the Bank’s top economists. At their monetary policy meeting last week three members dissented against the decision to keep interest rates steady, including Kristin Forbes.

Ross Walker, head of European economics at Natwest Markets, said: “She’s joining at a time when the committee looks more divided along fundamental lines.”

The MPC is still one member short, with the Bank still yet to appoint a replacement for Charlotte Hogg, the former deputy governor who resigned after being criticised by the Treasury select committee for not declaring a potential conflict of interest.

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