Bank of England base rate needs to be increased

A member of the powerful Monetary Policy Committee has recently stated that it is essential that the base interest rate is increased in order to keep a lid on spiralling inflation, which could otherwise damage the economy. Andrew Sentance has voted to increase the rate for the past several months, but with the majority of members voting to keep the rate on hold the base rate has remained at its rock bottom level of 0.5 percent for the past nineteen months.

Sentance has said that the base rate should be increased gradually in order to try and curb inflation levels, which are currently way over the 2 percent target set by the government. Sentance was making a speech in London when he expressed his views, and minutes of Bank of England meetings show that he has voted for increases in the base rate for the past few months.

Between June and September Sentance was the only member of the Monetary Policy Committee that voted for an increase, but with all others voting to keep rates on hold the base rate remained static. Its current level is the lowest in the history of the Bank of England, which spans over three hundred years, and it was reduced to this level under the former Labour government amidst hopes that it would help to aid the failing economy during the global financial crisis and the recession.

In his speech Sentance stated: “I have voted for a rise in interest rates at recent MPC meetings — as a start to a gradual movement away from the exceptional level of monetary stimulus put in place to combat very difficult economic conditions last year. And I continue to believe that this is the right policy for the situation the UK economy currently faces.”

Tags: Monetary policy, bottom level, year, london, interest rates, Monetary Policy Committee, hundred years, Andrew Sentance