THE Bank of England (BoE) should embark on a gradual rise in interest rates to avoid the need for a damaging sharp increase later on, policymaker Andrew Sentance said yesterday.
Sentance, the most hawkish member of the nine-strong Monetary Policy Committee (MPC), said the BoE’s inflation forecasts had consistently underestimated the upside impact from rising global energy and commodity prices.
Writing in a Sunday newspaper, Sentance said the BoE’s forecasts had also persistently overstated the downward pressure on inflation from spare capacity in the British economy.
Annual consumer price inflation rose unexpectedly to a four-month high of 3.2 per cent in October, forcing BoE Governor Mervyn King to write another letter to government explaining why inflation remains so far above its two per cent target.
“It is now time for monetary policy in the UK to get back to business and for interest rates to rise gradually towards normal levels,” said Sentance, who has been arguing for an interest rise since June.