BoE’s Sentance reiterates call for higher rates

BANK OF ENGLAND hawk Andrew Sentance yesterday repeated his call for a gradual increase in interest rates and argued that such a policy would support rather than threaten the recovery and bolster the central bank’s inflation-fighting credibility.

In a speech in London, Sentance said: “It is the right response to an economy which is growing but experiencing persistent above-target inflation. It would reduce the risk of a future shock to confidence if current above-target inflation does become more deeply embedded and interest rates then need to rise more sharply to combat it,” he said.

At a time when many economists and policymakers are debating the need for further quantitative easing, and downplaying the UK’s high inflation, Sentance’s continued hawkish tone sets him even further apart from his fellow Monetary Policy Committee (MPC) members.

He also warned that the risk of a loss of both confidence in the inflation target and the MPC’s credibility appeared to be increasing. “We have seen two major spikes in inflation in the last two years. These repeated episodes risk eroding confidence that UK policymakers remain committed to low and stable inflation.”