The first to break ranks among the UK’s Monetary Policy Committee is one Andrew Sentance.
From the Bank of England’s just-released MPC meeting minutes:
The Governor invited the Committee to vote on the proposition that:
Bank Rate should be maintained at 0.5%;
The Bank of England should maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.
9 Seven members of the Committee (the Governor, Charles Bean, Paul Tucker, Spencer Dale, Paul Fisher, David Miles and Adam Posen) voted in favour of the proposition. Andrew Sentance voted against, preferring an increase in Bank Rate of 25 basis points.
That’s the first call for a rate rise since August 2008, according to Reuters.
Sentance’s reasoning:
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.
Reaction in the gilt markets; not much. If markets think there might be a coming change in British interest rate policy, they certainly don’t think it’s coming anytime soon. All hail the new complacency.
Related links:
Expecting inflation like it’s August 2008 – FT Alphaville
Sticky inflation, redux – FT Alphaville
Inflating the output gap at the BoE - FT Alphaville
Boringness of central banks to blame for bubbles – FT Alphaville