Mortgage News
BoE hawk Sentance wants gradual rise in interest rates
Bank of England inflation hawk Andrew Sentance believes policymakers should start gradually raising interest rates on improving economic conditions.
Sentance, who last month became the first member of the MPC to vote for a rate increase since August 2008, says the path to economic recovery could be uneven, but that did not equate to a risk of a double-dip recession, Reuters reports.
“I favour a gradual rise in Bank Rate which would be aimed to avoid destabilising confidence through a sudden lurch in policy,” he says.
“‘Tightening’ may be technically correct as the opposite of ‘loosening’ but it implies that monetary policy might become objectively tight and restrain the growth of the economy significantly. Again, that is not my view about the policy stance we currently need.”
His view comes as UK inflation eased from 3.4% to an expected 3.2%. However, core CPI inflation climbed to 3.1% from 2.9% – its joint-highest rate since records began in 1997.
Sentance describes Britain’s current monetary policy setting as “quite an extreme” one, which is no longer warranted.
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“In a sense, it’s the patient coming out of intensive care and into the recovery ward, and looking at adjusting what the medication might need to be,” he says.