The inflation battle heats up

He left with a warning. “I think that there is a big risk emerging to the credibility of the Bank,” said Andrew Sentance last night, on his final day as a member of the Monetary Policy Committee. And he continued, “If inflation does not come down in the way that the Bank is suggesting — and I think there is a big risk that is the case — then that is going to have a big knock on effect on the credibility of the bank’s commitment to its inflation target.”

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Sentance’s views are unsurprising. He has, after all, been pushing for an interest rate hike for some time, and for the reason he outlined last night: “what I find difficult to see is a Monetary Policy Committee not responding at all when inflation is so much above target and the economy has turned round so far from the situation we were in a couple of years ago when we brought interest rates down to half a percent.”