Ex-policymaker wants Bank to plan for interest rate hike

 
Ben Southwood
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THE BANK of England should abandon quantitative easing (QE) for the time being, and plan on bringing the base interest rate back up towards “sustainable” levels by mid-2015, ex-ratesetter Andrew Sentance said today.

The risks of the bank’s “very loose” monetary policy are beginning to outweigh the benefits, Sentance argued, especially when the economy is on its way to recovery. Keeping interest rates so low is distorting economic decision-making, and keeping inflation above target, Sentance says in the PwC report.

These claims came in tandem with optimistic forecasts for economic growth in 2013 – growth of 1.8 per cent. This projection is a 0.1 percentage point improvement on PwC’s last forecast in July, and comes well above consensus forecasts, running at 1.1 per cent.

“We believe that our views are justified in the light of the latest figures that showed a healthy rebound to GDP growth of one per cent in the third quarter,” said chief PwC economist John Hawksworth.