Interest rates and inflation: could the MPC be getting it wrong again?
A while back I wrote about the threat to the economy that might arise from the poor judgement calls of the Bank of England on interest rates. I admit this year it will be exceptionally hard to decide what to do with interest rates but that uneasy feeling I had during 2008 (when the Bank made a series of duff decisions) began to return as I read Andrew Sentance’s comments to The Guardian.
Sentance is hedging his bets in the interview urging a “wait and see” attitude as quantitative easing ends. Nevertheless, he fears that rising commodity prices and the weakness of Sterling might push inflation up which seem fair concerns. But at the very end of the Guardian article, the prospect of wage pressure on prices was raised once again. Given this was what got the Monetary Policy Committee so confused in 2008, I’m amazed this is even being mooted at all.
In 2008 Sentance voted eight times to hold rates and four times to reduce (three of those times after the crash when even the most hawkish noticed that something was wrong). Only über-hawk Tim Besley has a more hawkish record than Sentance. Draw your own conclusions.