Policymaker urges BoE to respond to inflation

| January 24, 2011 | 0 Comments
’Policymaker

Andrew Sentance, one of the Bank of England’s Monetary Policy Committee (MPC) members, has once again spoken of stubbornly high inflation.

Mr Sentance has, at the last seven rate-setting meetings, voted for the base rate to be lifted, in order to combat high inflation.

He is expected to have voted this month for rates to be increased – minutes of the meeting will be released on Wednesday, 26 January.

Once again, Mr Sentance has warned that the Bank faces losing its credibility if it is not seen to be fighting inflation.

The Office for National Statistics (ONS) announced last week that Consumer Price Inflation (CPI) rose to an annual rate of 3.7% in December, up from 3.3% in November.

The figure was much higher than the 3.4% analysts had expected and inflation has now been above its target of 2% for over a year.

Many leading business groups have suggested that inflation could reach 4% – because of the recent VAT hike.

Earlier this month, the central opted to keep interest rates at the record low of 0.5% – where they have been since March 2009.

The CPI inflation rate is a benchmark for the MPC and Mr Sentance continues to vote for interest rates to be lifted from their current low to bring inflation down. However, his fellow policy members continue to vote for rates to remain at 0.5%

Today, Mr Sentance said: “It would be a mistake to label all the global factors affecting inflation as one-off short-term disturbances and to see the medium-term influences purely in terms of domestic factors.

“As I have argued in recent months, if we do not start to raise UK interest rates gradually soon, we risk having to do so more aggressively in the future - which could create a big shock to business and consumer confidence further down the track,” he added.

In related news, policymaker Adam Posen continues to vote for an injection of £50 billion via the Bank’s quantitative easing scheme to boost the economy.

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