Home › News › Chamber News › Dr. Andrew Sentance, Bank of England, speaks at Chamber of Commerce event in Reading
Tuesday, 13th July 2010
In a speech entitled: UK Monetary Policy – How Long Should “The Song Remain the Same”?, Dr Andrew Sentance, external member of the Monetary Policy Committee, shared his views on the current economic situation. Addressing over 100 people representing business in the Thames Valley, Dr Sentance began by reminding the audience that the region has the highest GDP per head outside central London. He also referred to the Work Foundation report, ‘Cities left Behind’, launched last week, which revealed that Bracknell & Reading combined were number one in the top ten cities in the UK to find work.
Andrew went on to explain how his view of economic prospects has shifted and why he voted for a small rise in interest rates in June.
Andrew began by explaining that last year the economic backdrop was one of sharp falls in demand and rising unemployment, uncertainty about recovery prospects and a general expectation of persistent below target inflation. “A year on, however, the economic situation has changed,” he said. Andrew described a number of features of the current economic situation that he believes are very different from the expectations of last summer.
He argued that the world economy has bounced back strongly, and while uncertainties persist, “…worries about possible uneven-ness in the pace of global growth should not be confused with signs of a ‘double-dip’ recession”. In turn, he believes that “…the UK economy has also turned around since last summer”. He points to a reverse in the downward shift in money spending as well as positive business survey outturns as evidence of a rebound. He also believes that expectations of large margins of spare capacity have not been borne out by the available data. And he suggests this may, along with the depreciation of sterling, help to explain the failure of inflation to drop back in the way the MPC expected a year ago.
Andrew also concurred with business surveys that are showing a generally positive picture including the Chamber’s Quarterly Economic Survey which points to a particularly strong rebound in manufacturing, with a slower recovery in the services sector. Both manufacturing and services are showing a return to positive growth.
Andrew concluded by saying: “In my experience, recoveries have momentum. While growth might not be totally steady and even across sectors, as recovery progresses, various mechanisms begin to operate which can give it added momentum”. He adds: “A year ago, the predominant worry was that inflation could be significantly depressed by the impact of the recession. That risk did not materialise. And while I’m not yet worried that we face a major and serious risk in the opposite direction, I do think we need to adjust the policy settings we put in place to head off the downside risks to inflation identified in the immediate aftermath of the big financial shocks in late 2008 and early 2009.”
About Dr. Andrew Sentance
Dr Andrew Sentance is an external member of the Monetary Policy Committee of the Bank of England, appointed by the Chancellor of the Exchequer in 2006. The Monetary Policy Committee is responsible for setting interest rates in the UK to meet the Government’s inflation target.
He is also a part-time Professor of Sustainable Business at the University of Warwick, based at Warwick Business School, and a member of the Commission for Integrated Transport – which provides advice to the Government on transport policy issues.
Before joining the Bank of England, Andrew was Chief Economist and Head of Environmental Affairs at British Airways. He was one of the five senior managers appointed in 2001 to prepare the company’s “Future Size and Shape” turnaround plan.
He joined British Airways in 1998 from London Business School, where he was Director of the Centre for Economic Forecasting. Previous positions held include Head of Economic Policy and Director of Economic Affairs at the Confederation of British Industry (CBI). He was a founder member of the Treasury’s Panel of Independent Forecasters – established in 1992 to provide advice to the Chancellor of the Exchequer.
Andrew was educated at Eltham College, Cambridge University (Clare College) and the London School of Economics, where he gained his PhD. He holds a visiting professorship at Royal Holloway, University of London and is a Fellow and former Chairman of the Society of Business Economists.
Note to editors
The full transcript of the speech can be found in the link below
Press enquiries to:
ginettegower@thamesvalleychamber.co.uk
