LONDON, (MNI) – Bank of England Monetary Policy Committee member
Andrew Sentance said growth and inflation have moved in the direction of
strengthening the case for a UK rate hike.

In a question and answer session at an Institute of Economic
Affairs event, Sentance welcomed fellow MPC Member Martin Weale’s
support for a hike in rates and said there were divisions on the MPC,
the full extent of which would become clear when the February minutes
are published next week.

“You will get a complete picture of the views on the Monetary
Policy Committee when the minutes are out …But. .. the Governor
(Mervyn King) made clear that there are differences of views on the
Monetary Policy Committee,” Sentance said.

“I was very pleased to see that Martin Weale joined me in the
position of supporting a rate rise at the January meeting,” he added.

Sentance said that during the period in which he has been arguing
for a rate hike, “I feel that the arguments, both in terms of growth in
the economy, particularly growth in the global economy, and inflation
have moved in that direction.”

Sentance was asked what would have to happen for him to reverse his
call for a rate hike, He said he would back down if there was a serious
set back in the global economic recovery but later added he expected
world growth to remain robust.

“I see the UK as very heavily influenced by the international
economy … If we saw a really serious setback to the global economy I
think that would … change my view,” Sentance said.

Sentance noted that the IMF forecast is for “pretty strong global
growth and indeed the Bank of England’s central forecast is for strong
global growth.”

Sentance said the BOE inflation forecast assumes “the price
increases that we are seeing in global markets to subside quickly and I
am not convinced of that.”

In the Inflation Report press conference Wednesday Bank of England
Governor Mervyn King mocked the idea of a token rate hike as a “futile
gesture”.

Sentance rejected the idea there was any “tokenism” in his case.

“I wasn’t arguing for a change in monetary policy for a token
reason,” he said.

“The longer this overrun in inflation persists I think the more
difficult that becomes for the Monetary Policy Committee. …. The risk
of leaving interest rate rises for longer is they (rate hikes) may have
to be more abrupt,” Sentance said.

–London newsroom: 44 20 7862 7491; email: drobinson@marketnews.com

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