MPC's Sentance keeps up pressure to raise interest rates

18 August 2010

Andrew Sentance voted against the rest of the Monetary Policy Committee (MPC) for a rise in interest rates for the third consecutive month, minutes from the August meeting show. Sentance wants an immediate 0.25% rise in benchmark UK interest rates from 0.5% to 0.75%. He has been voting for the increase since June, putting pressure on the other members of the MPC to raise the base rate. But in the meeting earlier this month, the Governor of the Bank of England Mervyn King and the seven other members all voted in favour of keeping rates at their current low. Interest rates have now been at 0.5% for 18 consecutive months. The release of the eight to one split has sent the pound higher with sterling up 0.1% against the dollar and 0.16% against the euro. The MPC also avoted unanimously to maintain quantitative easing, the programme of asset purchases financed by the issuance of central bank reserves, at £200bn. Jeremy Cook, chief economist at World First, said: "The language and tone of the MPC minutes suggests the committee is becoming more and more comfortable with the idea rates will have to rise soon as inflation expectations increase. "An increase of 25bps or 50bps would still leave policy in the ‘expansionary' category but I still believe that we will not see rises before Christmas." Published by IFAOnline