Five Things We Learnt From BOE Haskel At Treasury Committee

By David Robinson

     LONDON (MNI) - Jonathan Haskel is set to join the Bank of England Monetary

Policy Committee (MPC) from September 1 and he gave evidence at his appointment

hearing at the Treasury Select Committee (TSC) Tuesday. 

     Here are five things that we learnt:

     -Haskel is not joining the MPC with a strong prior belief about whether and

when Bank Rate should be raised. Asked about how he expected UK interest rates

to evolve over the next year and over the next three years Haskel said it was

too early for him to say.

     "It would be premature for me to express a view, as I don't have access to

the full array of forecasts and knowledge within the Bank," Haskel said.

     Haskel is an academic specialising in productivity and he said that  he did

not run his own model of the UK economy and hence had much to learn.

     -Haskel does have a strong suspicion that there is more slack than commonly

assumed in the UK economy, and that pay pressures will remain subdued.

     He told the TSC that the increased mobility of capital "weakens the

bargaining power of workers" and that with lots of workers doing part-time and

portfolio work measuring how much slack remains "in the modern economy ... is

much harder."

     -Haskel said the view he previously expressed that UK interest rates

remained low was "rash" but that it was based on his view that pay pressures

were subdued. This view was widely reported when he was appointed.

     -Haskel said he a "little bit of a productivity optimist". All else equal

this is dovish as it entails growth could pick up without generating inflation.

     He believes that the data mis-measurement of high-tech sector and the scope

for catch up with the US "suggest future productivity might be higher."

     As productivity is his academic speciality, this is a view that he is

unlikely to ditch any time soon after joining the Bank.

     -Haskel is not a like-for-like replacement for soon to depart MPC member

Ian McCafferty. While Haskel was giving evidence to the TSC and making

cautiously dovish comments, McCafferty was speaking at an OMFIF event and

setting out the case for raising Bank Rate immediately.

     McCafferty said that there was "a significant risk that inflation will

still be above our 2% target at the two-year horizon" and he argued that

tightening policy now "could well prevent the need for more aggressive

tightening later on."

     While Haskel acknowledged that there was a risk in moving too late the big

picture he set out did not tally with McCafferty's view that upward inflation

pressure needed to be counteracted as soon as possible.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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