A LONE dissenting voice in the Bank of England’s Monetary Policy Committee (MPC) this month urged for a hike in rates, the first time since August 2008 that such a call has been made.
External MPC member Andrew Sentance, who has recently expressed disquiet about stubbornly high inflation in both MPC meetings and in the press, voted for an increase in rates of 0.25 per cent. The other seven members of the committee voted to keep rates on hold at the historic low of 0.5 per cent.
The minutes said that for one member, inflation had been resilient in the aftermath of the recession, casting doubt on the future dampening impact of spare capacity on inflation.
While it was not surprising that it was Sentance who dissented, the timing was a shock. “Given his generally hawkish voting record, it did seem as though he would be in favour of raising rates reasonably soon. However we did not expect dissent at this juncture, especially ahead of the Budget,” said Investec’s Philip Shaw.
Henderson’s Simon Ward said: “It would be understandable if some MPC members felt wary about the Osborne-King deal, under which the chancellor believes he has bought off interest rate rises by acceding to the governor’s demands for accelerated fiscal tightening while transferring supervisory powers to the Bank”.
The minutes suggested little support for Sentance, said Ward, with a minority claiming that downside inflation risks have increased. “The governor, it seems, exerts an iron grip,” he added.
EXTERNAL MPC MEMBER
IT WAS no surprise that Andrew Sentance was the first member of the Bank of England’s Monetary Policy Committee (MPC) to call for a hike in interest rates.
Sentance had already proved very hawkish in an interview with the Sunday Times, pointing to the resilience of inflation in the aftermath of the recession, which had cast doubt on the future dampening impact of spare capacity on inflation.
He has repeatedly highlighted his concerns about upward price pressures for more than a year. Last June he gave a speech, stressing the importance of the MPC’s responsibility for low and stable inflation.
Educated at Cambridge and the LSE, Sentance has sat on the MPC since 2006. He is also a professor of sustainable business at Warwick Business School and advises the government on transport policy issues. He was chief economist and head of environmental affairs at British Airways. He has also held positions at London Business School and the CBI.