You will recall that the Bank of England has seen its ranks split. The minutes from the last meeting of its interest rate setting MPC committee revealed two schools of thought.
On one hand are the doves who think inflation pressures are relatively under control. They point to the fact that with many one off price hikes about to fall out of the annual figures, inflation will retreat over the next few months. They then add to their positive arguments by saying wage inflation is still very muted.
But the pessimists, who count amongst their number the boss Mervyn King, also have one of the two deputies, John Gieve.
And yesterday, it was Mr Gieve’s turn to throw in his tuppence.
For the Bank’s deputy hawk, it comes down to risk. There’s risk that if rates rise too high, the economy will slow more than is necessary. But equally, if rates are not pushed up high enough, inflation could rise too much.
Right now, Mr Gieve sees the first of these two possibilities as being the biggest danger.
Yesterday he explained why he voted for a rate hike earlier this month. He said “I felt that the impact of moving to slowly on the credibility of the regime (sic) and thus the future prospects for the economy was of greater concern, given the robust rate of growth, than an unnecessary slowdown in activity.”
Continuing with his hawk theme, he added that he was “not convinced that current rates would be sufficient to bring credit growth and nominal demand back to their long-term sustainable path.”
Find out about the next instalment of “Threadneedle Street,” the tale of hawks and doves next week, when the MPC meets again.
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