BOE Sentance: Higher Interest Rates Needed To Boost Economy-Report

inspector_monkfish

09:20 30Dec10 - BOE SENTANCE: HIGHER INTEREST RATES NEEDED TO BOOST ECONOMY -REPORT
09:22 30Dec10 - BOE SENTANCE: HIGHER RATES MAY ALSO "KEEP A LID ON" INFLATION -REPORT
09:23 30Dec10 - BOE SENTANCE: GOVT'S JAN SALES TAX HIKE MAY FORCE BOE RATE RISE-REPORT
09:25 30Dec10 - BOE SENTANCE: HIGHER RATES SHOULD BE SEEN AS POSITIVE ECON SIGN-REPORT
09:49 30Dec10 - BOE Sentance: Higher Interest Rates Needed To Boost Economy-Report

DJ BOE Sentance: Higher Interest Rates Needed To Boost Economy-Report

LONDON--Higher U.K. interest rates are necessary to boost the economy and also temper inflation, Bank of England member Andrew Sentance said, U.K. newspaper the Daily Mail reports Thursday.

Sentance said that higher interest rates would be a boost to the U.K.'s savers and should be seen as a positive signal on the U.K. economy, according to the paper.

The paper quotes the hawkish Monetary Policy Committee member, who has voted for an increase in rates for several months now, as saying that the government's sales tax hike to 20% from 17.5% next week is likely to push inflation above 4% next year, but that a base rate hike by the central bank could temper this upward move.

He said this move alone is likely to persuade the central bank to "gradually" raise rates from the current record low rate of 0.50%.

Sentance added that any increase in U.K. interest rates "should be seen as a positive signal that the economy is beginning to return to normal after the recession".

inspector_monkfish

00:11 30Dec10 - BoE's Sentance warns of risk in rate rise delay-report

LONDON, Dec 29 - The Bank of England should raise interest rates sooner rather than later to contain inflation, bank policymaker Andrew Sentance was quoted as saying on Wednesday.

The Daily Mail newspaper quoted him on its website as saying that a planned rise in VAT sales tax next week to 20 percent from 17.5 percent would push British inflation above 4 percent.

Sentance, the most hawkish member of the Bank of England's nine-strong Monetary Policy Committee, has repeatedly called for a rise in rates. He was alone in supporting a rise at the committee's December policy meeting, minutes showed.

Rising inflation would force the bank gradually to raise rates from the record low of 0.5 per cent, the newspaper quoted Sentance as saying. It did not give the context of Sentance's remarks which it said were made on Wednesday.

"If we delay too long in raising the official interest rate and inflation continues to be a problem we risk making sharper rises in the future," Sentance was quoted as saying.
"In my view, that poses a bigger threat to confidence and to the recovery than starting to raise interest rates gradually now," he said.

British inflation rose to a six-month high of 3.3 percent in November, the 11th consecutive month it has been at least a percentage point above the Bank of England's 2 percent target.

The newspaper quoted Sentance as saying higher rates "could benefit the economy."
"It would help to protect savers from the effects of higher inflation by raising the return on their savings deposits," he was quoted as saying.

"It is clearly important that interest rate rises do not derail the recovery," Sentance said.

"That suggests we should aim for a gradual rise in interest rates which gives businesses and individuals time to adjust their finances," he said.

"A gradual rise in the official Bank rate from a record low level of 0.5 per cent should be seen as a positive signal that the economy is beginning to return to normal after the recession," he added.

Masomnia

I wonder if higher rates might put the brakes on the deleveraging that's going on, perhaps that could be good for the economy, mean less QE etc. Just thinking aloud.

Euphoria1z

dont know if this is relevant here, but ive been wondering, what would happen if America keeps printing money/QE and the UK doesnt? what would the effects be? who would be worse off?

satchmeister

Interest rates do not need to rise to bring down inflation. The easy way to control inflation is just to change the components and remove the items that are causing the index to rise.

This is exactly what Gordon Brown did.

RenovationMan

Its interesting to see that Sentance is now talking about boosting the economy rather than concentrating soley on inflation. Could it be the case that he's hedging his bets because perhaps the BoE 'wait and see' stance on inflation is actually working and so Sentance is having to bolster his position by adding in brand new criteria for raising rates?

Still, it gets him a lot of press exposure.

ILW

satchmeister wrote: »

Interest rates do not need to rise to bring down inflation. The easy way to control inflation is just to change the components and remove the items that are causing the index to rise.

This is exactly what Gordon Brown did.

Such as?....

whatyadoinsucka

as per another of my posts I'm getting sick to death of andrew sentance, remember there are 9 members of the committee and this guy is not the boss or a deputy for that matter..

he never mentioned unemployment does he !!

PasturesNew

If rates are going up, I'll have the confidence to rent somewhere again. Three years ago it'd have paid my rent/bills, now there's not enough for a chip supper... and I've looked at rents and they're huge!

michaels

Rather like bank bonuses there seem to be asymmetric risks and rewards for Mr Sentance - get it wrong and no one remembers or he can claim that his suggestions were never implemented. Get it right and he can appear a genius and clean up.

thor

ILW wrote: »

Quote:
Originally Posted by satchmeister
Interest rates do not need to rise to bring down inflation. The easy way to control inflation is just to change the components and remove the items that are causing the index to rise.

This is exactly what Gordon Brown did.




Such as?....

Yes I am interested in this answer as well.