Wednesday, July 11, 2007
A hawk speaks
Posted by David Smith at 10:00 AM
Category: Thoughts and responses

Andrew Sentance, in a speech, explains why, having been tipped to become the monetary policy committee's resident "dove", he has turned out to be one of its hawks, voting seven times for higher interest rates in his nine meetings. The strength of the global and UK economies and the argument that by acting early you reduce the eventual peak in rates are his main ponts. The speech can be accessed here.

Comments

Dear David,
It is clear from the speech that the MPC respond to inflation and output volatility (in addition to inflation and the output gap) when setting interest rates. This is part of their communication policy to hint what their interest rate reaction function might look like.
Many thanks.

Posted by: Costas Milas at July 11, 2007 12:04 PM
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