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| What Michael Saunders, the newest member of the Bank of England’s Monetary Policy Committee, really thinks about the economy in 8 quotes | |
| (35 minutes later) | |
| Michael Saunders, the veteran economic analyst at Citigroup, has been unveiled as the replacement for the hawkish Martin Weale on the nine-person Monetary Policy Committee [MPC] from August. | |
| Saunders has been one of my favourite City economists – his analysis is always clear, rigorous, enlightening and reasonable. Other hacks like his stuff too, judging by how frequently he's quoted. So below are eight of his views, picked up by the media, over the past few months which give a flavour of what he’s taking on to the MPC. | |
| Draw your own conclusions on where he fits on the hawk-dove spectrum. In other words, will Saunders be in favour of raising the cost of borrowing earlier to head off the risk of inflation? Or will he want to hold them down, or even take them into negative territory?: | |
| 1) NEGATIVE INTEREST RATES | |
| “The MPC needs to do more work to assess the feasibility of cutting interest rates below zero in case the global outlook worsens markedly further” January 2016 | “The MPC needs to do more work to assess the feasibility of cutting interest rates below zero in case the global outlook worsens markedly further” January 2016 |
| 2) INFLATION | |
| “We suspect that 2016 will see low but positive inflation in the UK: in other words, an end to deflation but continued lowflation” December 2015 | “We suspect that 2016 will see low but positive inflation in the UK: in other words, an end to deflation but continued lowflation” December 2015 |
| 3) CURRENT ACCOUNT DEFICIT | |
| “It is not ‘kindness’ that prompts people to invest in the UK in our view, but the prospect of relatively high yields plus economic stability. If these underpinnings come into question, then the UK’s ability to attract capital at any given yield is likely to be much weaker.” April 2016 | |
| 4) EU REFERENDUM | |
| “We believe the UK’s EU referendum has probably opened up a can of worms, which will create persistent political and economic uncertainties even in the event that the UK votes to stay in,” March 2016 | “We believe the UK’s EU referendum has probably opened up a can of worms, which will create persistent political and economic uncertainties even in the event that the UK votes to stay in,” March 2016 |
| 5) HOUSEHOLD BORROWING | |
| “While deleveraging is ending, credit growth is not yet dangerously high and is still some way short of the double-digit growth rates seen in the pre-crisis period.” March 2016 | “While deleveraging is ending, credit growth is not yet dangerously high and is still some way short of the double-digit growth rates seen in the pre-crisis period.” March 2016 |
| 6) MPC | |
| “A fairly elegant swerve..The MPC are sensibly pragmatic, they react to the data and do not lock themselves in" on Mark Carney’s change of view on timing of likely interest rate rise January 2016 | |
| 7) OSBORNE'S AUSTERITY | |
| “Whatever the spread of the cuts, they are likely to represent a sizeable headwind to growth,” November 2015 | “Whatever the spread of the cuts, they are likely to represent a sizeable headwind to growth,” November 2015 |
| 8) PRODUCTIVITY | |
| “Weakness in productivity is starting to look like a structural feature which implies lower potential growth and lower growth of real incomes per head for the UK in coming years.” April 2016 |