New MPC member criticises Bank's interest rate hawks

Click to follow
The Independent Online

Kate Barker last night used her maiden speech as a member of the Monetary Policy Committee to launch a thinly veiled attack on colleagues who had argued against rate cuts over the summer.

Ms Barker said the UK economy would have been less well-placed to withstand the shock of the 11 September terrorist attacks if rates had been kept higher over the summer because of worries over consumer demand.

The speech, which will earn her a reputation as a "dove" on the committee, is the fifth by an MPC member within a week to hint at further rate cuts.

In an address to the Scottish Economic Society, Ms Barker discussed the imbalances in the UK economy, which many think could lead to an inflationary surge if there was a sharp adjustment. She warned it would be "unwise" to pre-empt any moves in rates that might be needed when the adjustment took place.

"Had interest rates been raised – or kept higher – over the summer of 2001, due to anxiety about the growing trade and consumer imbalances leading to an inflationary fall in sterling, then when the actual shock of the terrorist attack occurred, the UK would have been less well-placed to weather the ensuing storm," she said.

Ms Barker's speech comes a day after Christopher Allsopp, an "outside" committee member, told The Independent that weakness in the economy suggested "lower interest rates in the future". On Sunday, Sushil Wadhwani, also an "outside" member, said the right level of rates was "below here".

The comments are being seen as signs the Bank is preparing for a rate cut in a fortnight's time ahead of its inflation report the following week.