Michael Saunders, an economist at the investment bank Citigroup, has been appointed to the Bank of England’s interest rate setting committee.
Saunders, a respected commentator on economics after more than 25 years at Citigroup, will replace Martin Weale whose term on the monetary policy committee (MPC) ends in August. Weale joined the nine-strong committee in 2010 having previously headed the National Institute of Economic and Social Research.
Announcing the new appointment, chancellor George Osborne said Saunders would serve an initial three-year term on the MPC from 9 August.
“Michael brings a wealth of economic experience both on the UK and global economy and will make a strong addition to the MPC,” Osborne said in a statement.
Saunders is head of European economics at Citigroup, having joined the bank in 1990. Before that he worked briefly as an economist at Greenwell Montagu (now HSBC) and the Institute for Fiscal Studies. He studied econometrics at the London School of Economics.
When Saunders joins the committee in August he will be one of nine policymakers - seven men and two women - who each get a vote on interest rates. There are five full-time Bank of England insiders on the committee and four external members appointed by the chancellor, of which Saunders is one.
The chancellor has previously faced criticism for failing to appoint women to the policy committee and the Treasury said upon announcing Saunders’ appointment that it received 23 applications for the position, of which four were from women. The appointment last year of Nemat “Minouche” Shafik as one of the Bank’s deputy governors ended four years of an all-male MPC.
Bank watchers will now be trying to gauge whether Saunders will be a rate “hawk” with a tendency towards voting for rises in the cost of borrowing or a “dove” that advocates a more cautious approach. Outgoing policymaker Weale, who has served two three-year terms, is widely viewed as one of the committee’s more hawkish members, having voted for rate rises on 12 occasions.
Alan Clarke, economist at Scotiabank, put Saunders in the dove camp, but noted the Citigroup veteran was not as dovish as those economists advocating rate cuts.
“General perceptions are that he will be dovish given his recent stance, though in the past he has not been shy to change his call should the data evolve unexpectedly,” said Clarke.
“I think he will bring a very eloquent flair to delivering the MPC’s message. Having seen some of Michael’s work, he clearly knows his stuff and is very thorough, so a well-deserved appointment.”
In recent research notes Saunders has expressed a view that the UK’s period of very low inflation is coming to an end and that the next move in interest rates will eventually be up, not down. He also said that in the event of a vote to leave the EU in June’s referendum, the next move in interest rates would still be up - a view that puts him at odds with most other economists who believe the Bank would cut rates to bolster confidence.
Saunders wrote with his colleague Ann O’Kelly on 8 April: “The MPC are unlikely to regard near-term weakness in the economy as a reason to loosen policy, but will wait to see how things look after the EU referendum. We continue to believe that the next move in rates will eventually be up rather than down, in both a Brexit scenario and our base case of continued EU membership.”
Weale leaves the committee having never been part of a decision to move borrowing costs, which have been on hold at a record low of 0.5% since March 2009. But he voted against the majority of the committee for a rise in rates to 0.75% at several consecutive meetings in 2011 and again in 2014.
Bank of England governor Mark Carney welcome Saunders to the committee.
“He brings first-rate knowledge of the UK economy and a wealth of economic and financial experience,” Carney said in a statement.
Carney also thanked Weale for his contributions to the MPC.
“Martin joined the committee at a time of grave economic challenge for the United Kingdom, bringing invaluable practical knowledge of the UK economy coupled with academic expertise. Amongst his many contributions, Martin advanced our understanding of the labour market, assisted in the development of unconventional monetary policy and supported the Bank’s efforts to increase transparency and effective communication,” he said.
This article was written by Katie Allen, for theguardian.com on Friday 15th April 2016 16.40 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010