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Andrew Sentance repeats call for UK rate rise

Andrew Sentance has again repeated his call for an increase in UK base rates with concerns regarding the strength of inflation in the UK. Despite the fact he is outnumbered, as the sole MPC member in favour of a UK base rate rise at this stage of the economic cycle, he continues to repeat his thoughts and hopes for the future. So is Andrew Sentance right?

While there's no doubt that if inflation remains at the current level, or indeed were to rise even further, this will cause problems for the UK government and could see an adjustment in UK base rates. However, the Bank of England has been adamant for some time that UK inflation will fall in the short to medium term and a rate rise will not be required to squeeze the supply of cheap finance. The danger is that if UK base rates were increased to quickly this would cut short the economic upturn currently underway in the UK.

There is no simple solution to the quandary of UK base rates with inflationary pressure and a relatively fragile economic recovery at very different ends of the financial spectrum. If nothing else this will serve as a significant first test for George Osborne and David Cameron.

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