Wednesday, June 23, 2010
MPC's Sentance votes for a rate hike
Posted by David Smith at 11:00 AM
Category: Thoughts and responses

Andrew Sentance expressed some of his concerns about the resilience of inflation and the muted impact of spare capacity on it in a piece for The Sunday Times 10 days ago. Even so, he suggested that the interesting debates would come in the second half of the year. Instead, they have already started. He votes for a rate hike earlier this month, the first monetary policy committee member to do so since August 2008. The result was a 7-1 vote for no change (the MPC is temporarily down to eight members).

The minutes are here. This was Sentance's worry: "For one member, developments over the past month were consistent with a pattern which had been developing over the past year. Inflation had proved resilient in the aftermath of the recession, casting doubt on the future dampening impact of spare capacity on inflation. Demand had recovered at home and abroad, and the average growth of the main measures of UK nominal demand in recent quarters had been above typical pre-recession rates. Despite current uncertainties, for this member, it was appropriate to begin to withdraw gradually some of the exceptional monetary stimulus provided by the easing in policy in late 2008 and 2009." The other seven seemed happy to bide their time, concerned about downside economic risks.