Rates need to rise to aid recovery, says MPC’s Sentance
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Monetary Policy Committee member Andrew Sentance says the Bank of England has to increase interest rates to aid the recovery.
In an interview with the Reading Post, Sentance defended his decision to vote for a rate increase last month to 0.75 per cent, the first time an MPC member has called for an increase in nearly two years.
He says: “My point was that while not everything has dramatically improved in the economy, things are a lot better than where they were a year ago.”
Sentance admits that the economy was “quite bleak” a year ago but says he is confident a recovery is now well under way, and rates should be adjusted to compliment that.
He says: “Over a period of time we need to reassess the amount of support the recovery needs. We need to start a process of moving interest rates up from what is an extremely low level and another reason for that is inflation hasn’t turned out to be as low as expected.”
Sentance says the feeling of uncertainty in the economy is down to the arrival of the new Government and the emergency Budget.
He says: “The way I would describe the business situation now is that there has definitely been an improvement but perhaps there is more than the normal amount of uncertainty and that’s not surprising given where we are in the cycle.”
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Readers' comments (3)
Chris F | 14 Jul 2010 1:15 pm
How exactly will raising interest rates aid the recovery?
Debt costs increase, slowing business growth.
Consumers keep more funds on deposit and so do not invest (accepted this may help bank balance sheets some, but there are bigger problems with that lot anyway).
Homeowners will have less disposable income, further depressing sales.
Great idea to "aid the recovery".
I wonder if this man even has a mortgage, or knows how it is to worry about being able to pay the bills at the end of the month, or worry about losing your job and as a result the family home?
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William Kingsley | 14 Jul 2010 2:58 pm
Raising rates right now would be a major blow to consumer confidence on top of the austerity budget and forthcoming VAT rises which could stall the economy and drive a double dip or put another way a Death Sentance.
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Anonymous | 14 Jul 2010 8:26 pm
Inflation is too high and needs to be controlled or it could be a risk to the recovery/growth. Raising interest rates could be helpful in controlling inflation, it wouldn't necessarily be a bad thing.
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