Adam Smith Institute

Dr Andrew Sentance clearly relishes the difficult jobs. By day, he's the Chief Economist of British Airways, which of course has been in the thick of it recently. And by night (well, the odd Wednesday at least), he's a member of the Bank of England's Monetary Policy Committee (MPC), in charge of setting interest rates. He came along yesterday to share his thoughts at a Power Lunch here at the Adam Smith Institute.

As usual, the lunch was off the record, though I can reveal that the economists around the table disagreed on pretty much everything, as of course you would expect. But they did seem to agree that the MPC is sailing through relatively uncharted waters. Global forces point as much to inflation as they do to downturn. The financial sector is in crisis but other parts of the economy still seem robust.

Still, after some years of over-easy credit, particularly in the United States, and government profligacy, particularly in the United Kingdom, I reckon it would be daft not to expect some 'adjustment' as economists call it. The interesting question is whether the MPC can manage things so that everyone gets back to normal without going into a blind panic because the value of their home is falling while their mortgage costs are going up. At least the banks are using the MPC's interest rate cuts to strengthen themselves a bit, so while that's no short-term succour to borrowers (or Gordon Brown) in the long run it at least makes further banking panics less likely.

Trouble is, the government share of the economy has been growing fast, while it's the rest of us who have to take the strain of all the past policy mistakes and the current policy prescriptions. Mind you, Andrew and friends wouldn't want life to be easy, would they?

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