MPC member says inflation will stay high for a "prolonged period"
Andrew Sentence, the departing member of the Bank of England’s Monetary Policy Committee (MPC) has said that he believes inflation is likely to stay high for a “prolonged period”.
Mr Sentence, who has consistently used his MPC vote over the last ten months to push for an increase in base rate, believes that the current rate of price increases will stay at current levels for some time.
His view is in stark contrast to the Governor of the Bank of England, Mervyn King who has said that inflation will reduce through natural consequences as the effect of temporary measures such as the increase in VAT have less impact.
Inflation increased to 4.5 per cent in April, up from four per cent in March. The Bank of England has said that it expects inflation to increase to five per cent during this 2011 but fall back to the target of two per cent in two years time.
Mr Sentence, whose tenure on the MPC ends at the end of this month shows through his comments that he does not believe that this will happen. In contrast to the Governor who believes that without the influence of VAT and energy prices inflation would be under control, Mr Sentence believes that inflation should be viewed with all influences included in the assessment and to strip out factors “risks losing credibility with the public.”
Mr Sentence comments come just days after the Deputy Governor of the Bank of England said in a speech that “the MPC's chosen approach has been to accept a temporary period of above-target inflation, rather than seeking to hold inflation as close to the 2% target as possible at all times.”
Another member of the committee, Chief Economist Spencer Dale who has also been voting for an increase in base rate since January said that inflation “could persist longer.”
Sign up for the Myfinances.co.uk newsletter for all of the latest financial news and features direct to your inbox.
Follow us on Twitter: @news_myfinances
Comments
Newsletter sign up