Blanchflower appointment to MPC took only ten days

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The Independent Online

David Blanchflower, the new member of the Bank of England committee that sets interest rates, said yesterday that the speed of his appointment had been a "shock".

The US-based economist, who will have to commute to London for the monthly rate meeting, said his recruitment process had taken just 10 days. "It was quite fast," he told MPs. "The process is a shock."

Asked by a member of the Treasury Select Committee whether he thought the process had been rushed, he said: "Perhaps."

Professor Blanchflower, who was born and educated in the UK, was giving evidence before his first meeting as a member of the Monetary Policy Committee (MPC) next month.

His appointment has been embroiled in controversy this week after it emerged officials at the Bank were angry they had been given only a few days to sort out his travel arrangements.

Yesterday he insisted he was qualified to help set rates, despite having no exposure to the UK mortgage market. "The nature of this appointment has to do with competence and independence and I hope to be able to persuade you that I have a strong background," he told the committee.

Asked about a highly publicised piece of research which found increasing the frequency of sex from once a month to once a week would generate as much happiness as a $50,000 (£26,750) pay rise, he said: "I am not a happiness guru. My interest is technical, as I am interested in well-being."

Analysts said he had managed to side-step the controversial aspects of his appointment. "Overall he presented himself in a very assured and professional manner," David Hillier, the chief UK economist at Barclays Capital, said.

The committee is expected to back his appointment when it publishes its verdict next week.

On the economy, Professor Blanchflower declined to say how he would have voted at this month's meeting when the MPC split three ways.

However, he indicated he was worried about the impact of high oil costs, saying he was "surprised" it had not fed through to higher prices. "The concern would be if there were to be a further increase in oil prices which drove up inflation and had major effects on employment and unemployment," he said.

He highlighted a recent survey by the Bank showing a rise in inflation expectations. He said he was particularly concerned a large number expected inflation to breach 5 per cent.

"The MPC will clearly have to monitor the future impact of oil prices," he said. He replaces Stephen Nickell, who gained a reputation for voting for rate cuts.

Jonathan Loynes, the chief European economist at Capital Economics, said: "The early indications are that he is unlikely to rock the boat by voting against the majority. At the margin, this would seem to increase the likelihood that rates will remain on hold."

A Treasury spokesman said: "Professor Blanchflower was appointed by the Chancellor with regard to his expertise and experience consistent with the Bank of England Act and following a rigorous appraisal by the Treasury of the available candidates."

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