Sentance: Take monetary stimulus away gradually
MONETARY stimulus needs to be withdrawn gradually to avoid destabilising confidence through a sudden lurch in policy, Bank of England policymaker Andrew Sentance said yesterday in a speech setting out why he voted for a rate rise in June.
Sentance, who was speaking yesterday in Reading, was the only member of the MPC to vote for a rise in interest rates in the June policy meeting.
He said there were four features of the current economic position which are now very different from the situation we faced last summer – the world economy has bounced back, the UK economy is also recovering, the margin of spare capacity does not appear to be as large as we had expected a year ago, and inflation has run above target rather than below it.
He said that sterling weakness was one obvious reason for the high inflation seen in the UK but added that another contributory factor could be the stance of monetary policy.