Ignis' Thomson: MPC should not raise rates during 2011

MPC SHOULD NOT RAISE RATES

Stuart Thomson, chief economist at Ignis Asset Management, discusses why a rate rise by the MPC could kill the UK recovery.

We do not believe the MPC brigade should charge into the valley of false credibility. Their task should not be to do so and kill the recovery. The February minutes showed three members of the MPC wished to raise interest rates, with one, Andrew Sentance arguing for a 50bp rise. The vote of 5-2-1-1 underlines the divisions within the Committee, which invalidates the mean forecast for inflation. This is based on constant interest rates in two years' time at the end of the forecast period. The forecast of 2.48% represents a significant increase upon the November estimate of 1.99%, but th...