INTEREST-rate setter Michael Saunders struck an interesting balance in his speech at the University of Strathclyde’s Fraser of Allander Institute.
He certainly gave the impression that he would be voting for a rise in benchmark UK interest rates when the Bank of England’s Monetary Policy Committee meets next month. He appeared unperturbed by news of a tumble in March retail sales on the official measure, attributing this to snow and noting that in the past such effects tended to be reversed over the next month or two.
Mr Saunders also appeared to signal a view that the unexpected drop in annual UK consumer prices index inflation to 2.5 per cent in March, also revealed this week, had no great bearing on the medium-term outlook for inflation.
His tone seemed much more hawkish than that adopted by Bank of England Governor Mark Carney on Thursday.
However, it was also interesting to hear Mr Saunders emphasise the high likelihood that UK base rates would in coming years remain well below the pre-crisis norm of about 5%.
Most economists are well aware of this likelihood. But what Mr Saunders emphasised was the value in getting this message across to households and businesses, to help ensure they did not over-react to rate rises.
Such communication is vital in these uncertain times.
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