Ex-BoE MPC member says 3% hike needed

Former Bank of England MPC member Andrew Sentance says rates need to rise by another 3% to control inflation.

Writing in the Times, ex-external MPC member Sentance said, “If I were a member of the MPC now, I would be looking to raise the official UK interest rate to at least 2 per cent by the autumn and to about 3 per cent by next spring.”

“This would still be relatively mild monetary policy action, given the prospect of 10 per cent inflation later this year, but it would be a much more appropriate response to current inflation risks than the MPC’s recent approach of gingerly and unconvincingly edging up UK interest rates.”

“It is often argued that higher interest rates would not help the economy when a large part of inflation is being generated by high prices for energy and food, but as the German Bundesbank demonstrated in the 1970s, a robust monetary policy response can also help to counter imported inflation by supporting the value of the currency,” he added.