— Adds Comments From BBC Radio Interview

LONDON (MNI) – Bank of England Monetary Policy Committee Member
Andrew Sentance has again called for gradual increases in Bank Rate in
order to tackle persistent above-target inflation.

In an interview with the Manchester Evening News newspaper,
Sentance said that he still believed that rates should rise to counter
high inflation.

“We are coming up to another meeting of the MPC in May and I
wouldn’t say anything we have seen since the last one changes my basic
position that there should be a gradual raising of rates,” Sentance
said.

“That often gets described as a ‘hike’ but the largest I have
argued for is an increase of 0.5%,” he said.

“We need to make a distinction between interest rates being low,
which they need to be, and keeping them exactly as they were in the
depths of the recession,” he added.

Sentance also said that the manufacturing sector of the economy is
performing well but warned that the services sector is suffering from
squeezes on disposable income,” he said.

“One message I have picked up from people I have spoken to while in
Manchester is that manufacturing seems to be doing quite well and that
is consistent with the national picture,” he said.

“However, the service sector is more of a mixed picture and that is
not helped by some of the squeezes on disposable income and the rise to
VAT,” he said.

“Having said that, what I would say is the view I got was that the
economy is recovering, even though in some areas it is recovering slower
than others,” he said.

MAJORITY OF MPC CONCERNED ABOUT STRENGTH OF RECOVERY

In a later interview with BBC Radio Manchester, Sentance said that
the majority of MPC members fear that the recovery is too weak to hike
rates now and that inflation will fall back toward target in due course.

“There are concerns that the recovery may not be as strong as we
would like and I can understand that and perhaps the view of the
majority on the committee is that inflation will fall back and that some
of the factors are temporary,” he said.

Commenting on the preliminary UK GDP figures due later today,
Sentance said that he expects the data will show the economy is growing.

“The other evidence that we’ve had this year shows the recovery is
continuing, manufacturing is growing particularly strongly, services not
so strongly, we had employment numbers that suggested that employment is
increasing, so it’s my view that the economy is continuing to grow and
I’d expect that to be reflected in the figures due later today,” he
said.

“There’s been quite a turnaround in the economy over the past two
years people may be suprised to hear that because the perception is not
necessarily that the economy is booming away. But the economy is now
growing,” he added.

Last month’s MPC minutes show Sentance again voted for a 50bps hike
in Bank Rate.

–London newsroom: 00 44 20 7862 7492;e-mail: ukeditorial@marketnews.com

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