View more on these topics

Sentance warns that inflationary pressure will force rise in rates

Former Bank of England monetary policy committee member Andrew Sentance believes that inflationary pressures may force the BoE to consider increasing interest rates in the near future.

In a letter published by The Daily Telegraph this week, Sentance said that the committee has been relaxed over inflation, having held bank rate at 0.5 per cent for 37 consecutive months and introduced £325bn of quantitative easing.

He said the MPC took these decisions in the belief that inflation would fall back to below 2 per cent once various shocks had worked their way through the system.

Burt he believes a U-turn may now take place as inflation rose slightly from 3.4 per cent in February to 3.5 per cent in March. He pointed to four reasons why high inflation may persist.

These include strong growth in India and China, putting upward pressure on food and energy prices, the big fall in sterling during the recession, which pushed prices up further, spare capacity in the UK economy from QE not applying the downward pressure the MPC had hoped for and rising prices encouraging businesses and the public to expect higher inflation in future.

Sentance said: “The first official estimate of economic growth for January to March will be published this week but, whatever GDP shows, the evidence in the first quarter is that the economy is growing – slowly. Rising interest rates could soon be back on the agenda.”

Highclere Financial Services partner Alan Lakey says: “The bank will raise interest rates at some point, which will not be good news for people with mortgages but it is the only effective tool to deal with inflation.”


Political whims stopping employers taking on risk

Experts have warned the Government that concerns over future political intervention could undermine attempts to encourage employers to take on more pension risk. Earlier this month, pensions minister Steve Webb outlined possible options for so-called “defined-ambition” provision. He said models could include encouraging firms to offer “cash balance” arrangements, where the company guarantees to deliver […]


MP raises fears over FCA prudential expertise

Conservative MP Mark Field says it is of “enormous concern” that the Financial Conduct Authority will carry out prudential regulation of investment firms similar to Arch cru, Keydata and MF Global, warning it will not have the expertise required. Under the new regulatory structure, the FCA will be responsible for the conduct and prudential regulation […]


Sants’ final speech: Tougher action needed on senior management

Outgoing FSA chief executive Hector Sants has called for there to be greater individual accountability in the event of firm failure and wants to see senior management subject to tougher penalties. Sants (pictured) used his last speech as FSA chief executive to set out firms’ responsibilities in having effective boards, hiring the right people for […]

Greece: the sideshow continues

Artemis managers James Foster, Mark Page and Laurent Millet comment on the Greek deal, describing it as “just another fudge” getting in the way of bigger developments in China, the UK and the US. To read the full article click here.


News and expert analysis straight to your inbox

Sign up


    Leave a comment