ARCH hawk Andrew Sentance ended his term at the Bank of England yesterday unable to convince his colleagues to normalise interest rates.
Historically low interest rates were kept on hold at 0.5 per cent for May, the monetary policy committee (MPC) announced.
Today, coincidentally, marks 14 years since the Bank of England’s independence was announced by Gordon Brown, chancellor at the time – sparking the creation of the MPC.
Rates have been held low since March 2009 by the MPC, despite Sentance voting for a steady rise every month from June of last year.
Three members of the nine-man committee have voted for increased rates since February.
Yet the minutes of April’s meeting revealed that the other two hawks -- Spencer Dale and Martin Weale – were less convinced than Sentance on the need for tightening.
And Weale’s recent comments suggest that he may be harbouring second thoughts. “First quarter GDP is likely to be weaker than many people, including myself, would have assumed,” Weale had said.
“It’s a big deal,” commented Richard Barwell, economist at RBS. “Weale sounds like a man backing off.”
From next month Sentance will be replaced on the committee by Goldman Sachs economist Ben Broadbent.
Broadbent is expected to be hawkish, yet analysts say it is notoriously difficult to predict how new members of the committee will vote.
“Most forecasters now think that the tightening cycle will simply start later this year,” said Deloitte’s Roger Bootle yesterday, “but I am sticking with my view that interest rates will stay at one per cent or below until 2014.”