An economics professor from the London School of Economics who warned against Brexit has been appointed to the Bank of England’s interest rate-setting committee.
Silvana Tenreyro was one of 280 economists who signed a public letter ahead of the referendum last year stating it would be a “major mistake” for Britain to leave the EU. She will replace the US economist Kristin Forbes who leaves the monetary policy committee (MPC) this month.
Tenreyro joins at a time of heated debate among policymakers over whether to leave interest rates at their record low to shore up growth as Brexit talks unfold, or to raise them in order to keep a lid on rising inflation. Forbes was one of three members voting for an increase in borrowing costs at this month’s meeting. The other five, including the governor, Mark Carney, voted to leave interest rates at 0.25%.
The LSE professor, who has British, Argentine and Italian citizenships, was appointed to the MPC by the chancellor, Philip Hammond, as one of four external members who supplement the expertise of those policymakers working at the Bank full-time. Her appointment is for an initial three-year term starting in July.
Tenreyro, the only woman on the MPC, will get her first chance to vote on interest rates at the committee’s next meeting in August. In the meantime, investors will be poring over her previous comments on monetary policy to gauge whether she will tend towards a “hawkish” stance – being more likely to push for higher rates to curb inflation – or err the other way as a so-called “dove”.
Martin Beck at the consultancy Oxford Economics said Tenreyro’s appointment meant the MPC’s “arch-hawk” had been replaced by an unknown quantity.
“Professor Tenreyro’s academic background does not offer any clues as to what her attitude might be towards the stance of UK monetary policy. However, she does replace someone who has recently been the most hawkish member of the MPC. Ms Forbes used the last three successive committee meetings to vote for a hike in Bank rate,” said Beck.
“Given that it is very much the pattern for newly appointed committee members not to vote against the consensus view, it seems likely that Professor Tenreyro’s appointment will shift the MPC’s balance in a dovish direction, at least in the next meeting.”
Tenreyro has a PhD in economics from Harvard University and at the LSE has specialised in macroeconomics and monetary economics, teaching in those subjects since 2004. She also has previous experience in monetary policy setting having worked as an economist at the US Federal Reserve Bank of Boston and served as an external member on the monetary policy committee at the Bank of Mauritius – attending many of its quarterly meetings via video conference.
Carney, who has been under pressure to ensure the Bank has more women in top jobs, welcomed Tenreyro’s appointment.
“Her extensive and varied academic experience – on the monetary transmission mechanism, the dynamics of productivity, trade, housing issues as well as wage dynamics, to name just a few – will be invaluable to the committee as it seeks to promote the good of the people of the United Kingdom through maintaining monetary stability,” Carney said in a statement.
Hammond commented: “I am confident that Professor Tenreyro will be a strong addition to the MPC, bringing a wealth of economic experience and academic rigour to the committee’s deliberations.”
In responses to a survey from the Centre for Macroeconomics after the Brexit vote, Tenreyro she said she felt the causes for the result were “multiple”. She indicated that some politicians had played on the immigration issue.
“Immigration certainly played a role in the exit vote, and many voters (partly encouraged by misleading politicians) thought immigration was to be blamed for their problems, while those problems are more complex and date longer,” she said in the July 2016 comments.
“Skill-biased technological progress, globalisation, and the fall of unions have created winners and losers, and the latter have not been compensated for their losses. They saw their standards of living deteriorate since the late 1970s, while at the same time salaries at the top of the distribution rocketed. Inequality is a critical issue in the UK and the west that needs to be addressed. Brexit was mostly an angry vote against the lack of progress of the bottom half.”
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