–Agrees With ‘Broad Thrust’ Of Present MPC Policy, BOE Fcasts
–Inflation Will Fall Back To Target In 2012 Once One-Off Effects Fade
LONDON (MNI) – Bank of England Monetary Policy Committee Nominee
Ben Broadbent equivocated today on whether he would be a hawk or a dove
when he joins the committee at the start of next month.
“I’m not willing to say exactly what I would have done as I
genuinely do not know…,” he told the UK parliament’s Treasury Select
Committee.
“I’ve not followed every number so I really don’t know”.
While he said that there was something to be said for Andrew
Sentance’s support for a rate hike, he added:
“You only have to look at the split of the vote across the
committee over several months, more than a year to see that there are
strong arguments on both sides”.
“There’s clearly a respectable case to be made (for higher rates),”
he continued.
“On the other hand there are huge risks in both directions still.
That is why you’ve had a split vote for quite a long time”.
Broadbent said that he sometimes leaned in a dovish direction and
sometimes in a hawkish one, but said he agreed with the ‘broad thrust’
of policy being pursued by the MPC:
“Sometimes one, sometimes the other. I don’t think I’ve always been
in the same direction… the broad thrust of policy I think I’ve
followed pretty much”.
But he refused to precommit to any particular rate path:
“I really don’t see any upside to my precommitting to a point of
view even before I join the committee, that would be wrong”.
“The big decision was very aggressively to ease monetary policy in
late 2008 and early 2009… it was the right speed. The right amount? To
be quite honest we have so little experience of measuring the effects of
bond purchases that judging the right amount of QE is necessary”.
Broadbent blamed the rise in oil and commodities prices for the way
in which the BOE had allowed inflation to drift so far above its 2%
target. But he was confident it would fall back:
“There has been a significant rise in the price of not just oil,
but all commodities… often the target has been missed for very much
that reason. That’s been the primary thing, this year, in particular,
we’ve also had the rise in VAT. If you strip both things out then you’re
much closer to the target. We would expect that when both those things
have dropped out of the inflation rate in 2012 then inflation will be
much closer to the target”.
There was no strong evidence, Broadbent said, that inflation
expectations had become delinked from the target, but it was a risk:
“Clearly there is a risk that the longer that these things go on,
that it gets embedded into people’s baseline view of what the underlying
rate of inflation is… I see know strong evidence that they have become
deanchored”.
He continued:
“I’m slightly suprised to see that they haven’t done so, it’s not
to say that they won’t”.
“My best guess is that it (CPI) will come down next year,” he said.
Broadbent said he would cast his vote as he saw fit in order to
meet the inflation target.
–London newsroom: 4420 7 862 7492; email: dthomas@marketnews.com
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