Bank of England MPC members divided as well

Though this is old news now. Like we see various Fed members divided over future course of policy, same is the case with Bank of England.

The divide began in June 2010 MPC where Andrew Sentance voted to raise rates by 25 bps and keep the purchase program at GBP 200 bn. Intrestingly, he advocates exiting from conventional policy first. Most econs say though unconventional followed conventional, the exit should be reverse from unconventional to conventional.

In Oct-10 policy, Adam Posen voted to increase the asset purchase by GBP 50 bn to GBP 250 bn. Sentance maintained his stance to raise rates by 25 bps and maintain purchase program at GBP 200 bn. Same thing was maintained in Nov-10 policy.

So we have three camps:

  • One which has seven members – maintain status quo on both rate and purchase
  • Posen – a rise in purchase by GBP 50 bn and rate unchanged at 0.50%
  • Sentance – a rise in rate by 25 bps to 0.75% and purchase maintained at GBP 200 bn

Also UK is one economy where inflation remains high as GBP has depreciated significantly. UK economy is open and imports large number of items. With depreciation, all these items have become costlier which is reflected in inflation numbers. Despute huge slack in economy, inflation remains high. THis has also confused BoE members.

There are four short speeches where they explain their stance to Treasury Committee Hearing on the Inflation Report.

  • Mervyn King
  • Paul Tucker 
  • Adam Posen  – He thinks inflation high purely because of depreciation of GBP. To maintain growth momentum, more stimulus is needed 
  • Andrew Sentance  – He says missing inflation targets so consistently isn’t good for BoE. He sees economy recovering. With rise in both commodity and wages, he does not see inflation sliding.

Interesting developments in central banking… I realise most of my posts today are on central banks..

One Response to “Bank of England MPC members divided as well”

  1. UK economy is interestingly poised « Mostly Economics Says:

    […] Dec-10, you had two dissenters. Adam Posen who voted to increase the asset purchase by GBP 50 bn to […]

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