LONDON (MNI) – The Bank of England Monetary Policy Committee’s
concern has been to make sure the UK economy can recover from the impact
of the financial crisis at a time when the banking sector is working
through its problems, Committee Member Andrew Sentance said here
tonight.
“Insofar, as we have a had a concern on the Monetary Policy
Committee – it’s been about the knock-on impact of the financial crisis,
not on the financial industry itself, but on the rest of the economy and
managing and making sure the rest of the economy can recover at a time
when the banking sector in particular is working through its particular
issues”.
Sentance made the comments during a panel discussion in the City
about London’s prospects as a financial centre.
The impact of the financial crisis on different financial markets
has been highly varied, Sentance said.
“Some markets have been hit and haven’t really recovered, but some
have benefited from a slow recovery in activity. Some markets were hit
by the recession rather than by the financial crisis itself…so there
is a great diversity of experience.”
Noting that London had not been hurt especially badly compared with
other leading financial centres of the world, Sentance said that the
MPC’s main concern had been managing the impact of the financial crisis
on the real economy:
London had advantages in a changing world economy, Sentance said.
“It’s true to say that the big picture in the global economy at the
moment is the continued strong growth in China, India and other emerging
markets and that has been particularly noticeable in this cycle – these
economies that were less affected by the recession have bounced back
more strongly…”
Big emerging economies would develop their financial services over
time, he said, but this would not go against London retaining a ‘very
strong place’ in the international financial system, he said.
Sentance said that one of the big ‘takeaways’ of the crisis had
been the consequences of living in an incredibly globalised economy.
“We used to think globalisation was an increase in trade and
investment flows across borders,” he said. But in the past decade the
process had involved the integration of China, India and Russia into the
global market system – “and their big pools of labour and natural
resources are interacting with the global market,” he added.
“The big challenge going forward is to find mechanisms that
actually can create a degree of stability when we actually have global
forces operating through the financial system, through the world
economy which we can’t properly control – we don’t have a global MPC,
we don’t have a global financial regulator…”
Sentance urged enhanced mechanisms of global economic coordination
and cooperation “at all sorts of different levels”, saying that without
such an improvement the globalised economy would be difficult to manage.
Sentance has supported a 25bp hike in Bank Rate at recent meetings
of the MPC, although minutes for the September meeting of the committee
are yet to be released (Sept. 22). The theme of a more globalised
economy creating price pressures on the UK over which it has limited
control has been a key element in his case.
–London newsroom: 00 44 207862 7492; email:ukeditorial@marketnews.com
[TOPICS: M$B$$$,M$$BE$]
