David Prosser: Which way will the MPC jump?

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The Independent Online

Outlook Another month, another meeting of the Monetary Policy Committee – and, in all likelihood, another announcement of no change to the policy on interest rates and quantitative easing. Chances are that the minutes of the latest meeting will reveal that the committee remains torn between its nervousness about an anaemic recovery and its worry that inflation remains too high.

In which case, it will be tempting to draw parallels between Andrew Sentance, the MPC member who has been in a minority of one in arguing for an early rate rise, and David Blanchflower, one of his predecessors on the committee. He spent months urging all his fellow MPC members to cut rates ahead of the recession before ultimately being proved right.

There is an argument to be made for Mr Sentance's view that early action is necessary to prevent inflation expectations from becoming entrenched. But the difference between his situation and that of Mr Blanchflower's is that while the latter's argument was backed up by greater volumes of data every month, the reverse is true this time: inflation has finally begun to tick downwards.

Indeed, the almost exclusively gloomy data we have had in recent weeks on everything from services to house prices should leave the MPC in no doubt about the way to go. With respect to Mr Sentance, the case for more monetary stimulus becomes stronger by the day.

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