Andrew Sentance, who is now senior economic adviser to professional services firm PricewaterhouseCoopers, argued that maintaining the UK’s ultra-loose monetary policy for too long risks distorting the economy.
Sentance said: "Dramatic cuts in interest rates and injections of money through QE played a key role in stabilising the UK economy in 2009 and helping bring about a return to growth.
“But these emergency conditions have passed and further injections of QE are having little beneficial impact. Indeed, persistent very low interest rates risk creating distortions in the economy and prolonging a period of persistent above target inflation.”
Sentance was an external member of the MPC from October 2006 to May 2011. He was a consistent hawk, who called for increases to the base rate from June 2010 to the end of his term.
In a new PwC report, he also recommended that the Bank considers gradually raising the base rate to between 2% and 3% over the next two to three years.
This move should be telegraphed well in advance, he argued, to allow businesses and consumers to plan for an environment of higher borrowing costs.
"Putting in place an exit strategy to gradually raise interest rates and unwind QE is one of the big challenges facing the next governor of the Bank of England,” Sentance concluded.
