Interest rates: Higher is a price worth paying, says Sentance

26th May 2011

Sentance, who steps down this month from the Bank of England's monetary policy committee, was reported on The Guardian website as saying his colleagues on the committee were wrong to believe there was little they can do to put the brake on an inflation rise that has sent prices soaring by 4.5%.

He said: "Monetary policy affects the exchange rate – which in turn can offset or reinforce our exposure to rising import prices. And the demand climate and the price expectations of firms can affect how much of this imported inflation comes through to the consumer."

Sentance has consistently argued for a rise in interest rates to bring down inflation. 

In his blog Shaun Richards, Mindful Money economist, says he believes that the bank has in effect abandoned its inflation target in a dash for growth.

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