LONDON (MNI) – Bank of England Monetary Policy Committee Member
Andrew Sentance restated his opposition to restarting Quantitative
Easing and argued for gradual monetary tightening in a Business Post
interview.
Sentance’s fellow MPC member Adam Posen made the case for
relaunching QE in a speech Tuesday, but Sentance is at the other end of
the policy spectrum, having voted at the most recent four MPC meetings
for a 25-basis-point hike in Bank Rate.
“There is no need [to restart QE] in my view,” Sentance said in an
interview in Nottingham.
“I actually think we should be preparing the ground for gradually
increasing interest rates in a measured way to reflect the fact that the
economy has improved and the inflation situation is not where we would
like it to be,” he added.
In Sentance’s view QE was a response to recession and the risk of
deflation, and not a tool to be used with the economy recovering and
inflation stuck above target.
“I see QE and very low interest rates as the response to the very
difficult situation which we faced from autumn 2008 to the middle of
last year,” Sentance said.
“As the economy improves, and particularly when inflation is above
target, we should be gradually moving back to a more normal level of
interest rates,” he added.
“Doing more QE would give the wrong impression on the state of the
economy. We need to create a perspective of getting back to normality,”
Sentance said.
“I think monetary policy is about two things. One is responding to
short-term needs and that is absolutely right. The other is creating
confidence about what it is trying to achieve in the medium- to
long-term,” he said.
In the interview Sentance also restated his view that looming
public sector cuts could be offset by private sector growth.
–London newsroom: 00 44 20 7862 7499;e-mail: ukeditorial@marketnews.com
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