Monday, January 24, 2011

Speech by Andrew Sentance at the European Policy Forum

Setting UK Monetary Policy in a Global Context

"In my view, the MPC needs to steer a middle course when it comes to global pressures on inflation. We should be prepared to look through genuine one-off shocks. But when it is clear that global inflationary pressures, coupled with a substantial decline in the exchange rate and reasonably healthy growth of domestic demand are all contributing to a sustained period of above-target inflation, then the time has come to act. As I have argued in recent months, if we do not start to raise UK interest rates gradually soon, we risk having to do so more aggressively in the future – which could create a big shock to business and consumer confidence further down the track."

Posted by dill @ 06:36 PM (1367 views)
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3 thoughts on “Speech by Andrew Sentance at the European Policy Forum

  • “The lack of a substantive policy response to persistent above-target inflation also enhances the risk of a loss of credibility in the inflation target itself and a loss of belief in the commitment of the MPC to achieving it”. Yes, fair enough!

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  • He is a lone voice until we see the minutes from the last meeting …

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  • Thanks for posting that snippet, alan, I couldn’t fit it in. One more point made in this speech, which isn’t get much of an airing in the mainstream is this:

    Indeed, as Chart 10 shows, UK domestic demand has bounced back healthily – almost as strongly as in the US and much more strongly than in the euro area. In real terms, UK domestic demand is 3.7% up on a year ago and in money terms, it has risen by nearly 7%.

    So price pressures aren’t wholly imported. There’s evidence here that some forms of inflationary expectation may already be in play.

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